8-KMaterial AgreementsShareholder MattersCorporate Changes+1

CENTERPOINT ENERGY INC 8-K Report, Material Agreement (Oct 1, 2018)

Filed October 1, 2018For Securities:CNP

Summary

This 8-K filing by CenterPoint Energy, Inc. (CNP) details material definitive agreements related to the recent public offering of common stock and depositary shares representing mandatory convertible preferred stock. On September 25, 2018, the company entered into underwriting agreements for the sale of approximately 60.6 million shares of common stock and 17 million depositary shares. These offerings were made under an existing registration statement, and underwriters exercised their full options to purchase additional shares. The filing also announces the establishment of the 7.00% Series B Mandatory Convertible Preferred Stock, effective October 1, 2018. This preferred stock carries a fixed dividend rate and will automatically convert into a variable number of common stock shares on September 1, 2021, unless redeemed earlier. The terms of this preferred stock establish its seniority, dividend payment structure, potential voting rights under specific default scenarios, and liquidation preference, ranking it senior to common stock but on parity with existing Series A preferred stock.

Key Highlights

  • 1CenterPoint Energy completed a public offering of approximately 60.6 million shares of its common stock.
  • 2The company also offered 17 million depositary shares, each representing a 1/20th interest in its 7.00% Series B Mandatory Convertible Preferred Stock.
  • 3Underwriters fully exercised their options to purchase additional common stock and depositary shares, increasing the total number of securities offered.
  • 4The 7.00% Series B Mandatory Convertible Preferred Stock has been officially established with key terms outlined.
  • 5Series B Preferred Stock dividends are cumulative and can be paid in cash, common stock, or a combination thereof.
  • 6The Series B Preferred Stock is mandatorily convertible into a range of common stock shares on September 1, 2021.
  • 7The Series B Preferred Stock ranks senior to common stock in terms of dividends and liquidation preference.

Frequently Asked Questions

While the 8-K doesn't explicitly state the purpose, such offerings are typically undertaken to raise capital for general corporate purposes, potential acquisitions, debt repayment, or to fund capital expenditures.

The Series B Preferred Stock pays a fixed cumulative dividend of 7.00% annually, payable quarterly. It is mandatorily convertible into shares of CenterPoint Energy's common stock on September 1, 2021, with the conversion ratio determined by the common stock's average trading price over a specific period prior to conversion. The company also retains the option to redeem this preferred stock under certain conditions.

The Series B Preferred Stock ranks senior to the company's common stock and any future stock expressly subordinated to it, regarding dividends and liquidation preference. It ranks on parity with existing Series A preferred stock and any future parity stock, and junior to any future stock expressly made senior to it.

Yes, the mandatory conversion of the Series B Preferred Stock into common stock on September 1, 2021, will increase the total number of outstanding common shares, which can dilute existing common shareholders' ownership percentage and potentially earnings per share.