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Bank of New York Mellon Corp 8-K Report, Unregistered Securities Sale (Oct 30, 2008)

Filed October 30, 2008For Securities:BKBK-PKBNYBNY-PK

Summary

This 8-K filing by The Bank of New York Mellon Corporation (BK) details a significant transaction on October 26, 2008, under the U.S. Treasury's Troubled Asset Relief Program (TARP) Capital Purchase Program. The company agreed to issue and sell $3 billion worth of securities to the U.S. Department of the Treasury. This involved 3 million shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, with a liquidation preference of $1,000 per share, and a ten-year warrant to purchase approximately 14.5 million shares of common stock at an exercise price of $31.00. The transaction, which closed on October 28, 2008, was a private placement exempt from registration. The preferred stock carries a cumulative dividend rate of 5% for the first five years, increasing to 9% thereafter, though dividends are payable at the discretion of the Board of Directors. The filing also outlines restrictions on common stock dividends and repurchases, as well as executive compensation limitations stemming from the Emergency Economic Stabilization Act of 2008.

Key Highlights

  • 1BK participated in the TARP Capital Purchase Program, receiving $3 billion in capital from the U.S. Department of the Treasury.
  • 2The capital injection consisted of $3 billion in Series B Preferred Stock and a warrant to purchase approximately 14.5 million shares of common stock.
  • 3The Preferred Stock accrues dividends at 5% annually for the first five years, then 9% annually thereafter, subject to board declaration.
  • 4The warrant has an exercise price of $31.00 per share and is subject to transfer and exercise limitations until certain conditions are met (e.g., qualified equity offerings totaling $3 billion).
  • 5The transaction imposes limitations on BK's ability to pay common stock dividends (in excess of $0.24 per share) and repurchase its common stock.
  • 6Senior executives have executed waivers and entered into letter agreements acknowledging and agreeing to modifications in compensation and benefits to comply with TARP regulations.
  • 7The Preferred Shares are redeemable at the Company's option, with specific conditions related to qualified equity offerings and timing.

Frequently Asked Questions

This 8-K filing announces that The Bank of New York Mellon Corporation (BK) has entered into a significant transaction with the U.S. Department of the Treasury as part of the Troubled Asset Relief Program (TARP). It details the issuance of preferred stock and a warrant to the Treasury in exchange for $3 billion in capital.

BK issued 3 million shares of Series B Preferred Stock with a liquidation preference of $1,000 per share, totaling $3 billion. This stock accrues cumulative dividends at 5% per annum for the first five years, increasing to 9% per annum thereafter. Dividends are payable only if declared by the Board of Directors and the stock has no maturity date.

The U.S. Treasury received a ten-year warrant to purchase up to 14,516,129 shares of BK's common stock at an exercise price of $31.00 per share. There are restrictions on the Treasury's ability to transfer or exercise the warrant, particularly concerning more than half of the shares, until the company achieves certain qualified equity offerings.

Yes, the agreement includes limitations on BK's ability to pay cash dividends on its common stock (exceeding $0.24 per share) and to repurchase its common stock. Furthermore, the company and its senior executives are subject to compensation limitations outlined in the Emergency Economic Stabilization Act of 2008 (EESA) and related TARP regulations.