8-KLeadership ChangesMaterial AgreementsSecurities & Listing+3

FIFTH THIRD BANCORP 8-K Report, Material Agreement (Dec 31, 2008)

Filed December 31, 2008For Securities:FITBFITBOFITBPFITB-PIFITB-PMFITB-PAFITBIFITB-PK

Summary

Fifth Third Bancorp (FITB) filed this Form 8-K on December 31, 2008, detailing its participation in the U.S. Department of the Treasury's Capital Purchase Program (CPP) under the Emergency Economic Stabilization Act of 2008 (EESA). The company entered into a material definitive agreement with the Treasury, receiving approximately $3.4 billion in exchange for Series F Fixed Rate Cumulative Perpetual Preferred Stock and a ten-year warrant to purchase common stock. This transaction represents a significant capital infusion for Fifth Third Bancorp during a critical period in the financial crisis. The preferred stock carries a tiered dividend rate, starting at 5% and increasing to 9% after five years, payable only if declared by the board. The company has redemption rights for the preferred stock, subject to certain conditions and regulatory consent. Importantly, the agreement imposes restrictions on the company's ability to declare dividends on common stock or repurchase equity, and requires Treasury's consent for such actions until a specified redemption or transfer occurs. Additionally, the company and its senior executives have agreed to comply with EESA executive compensation rules and have entered into amended compensation and change-in-control agreements.

Key Highlights

  • 1Fifth Third Bancorp received $3.4 billion in cash from the U.S. Department of the Treasury as part of the Capital Purchase Program.
  • 2The company issued Series F Fixed Rate Cumulative Perpetual Preferred Stock with a liquidation preference of $25,000 per share.
  • 3A ten-year warrant was issued to the Treasury, allowing the purchase of up to 43,617,747 shares of Fifth Third's common stock at an initial exercise price of $11.72.
  • 4The Series F Preferred Stock has a cumulative dividend rate of 5% per annum for the first five years, increasing to 9% thereafter, payable at the discretion of the Board.
  • 5Fifth Third Bancorp may redeem the preferred stock after December 31, 2011, or earlier under specific Qualified Equity Offering conditions, subject to Federal Reserve consent.
  • 6Treasury consent is required for dividends on common stock (above $0.15/share) or share repurchases prior to December 31, 2011, unless the preferred stock is redeemed or transferred.
  • 7Company and senior executives have agreed to comply with EESA executive compensation requirements, including waivers and amendments to benefit and change-in-control agreements.

Frequently Asked Questions

This Form 8-K reports that Fifth Third Bancorp entered into a material definitive agreement with the U.S. Department of the Treasury as part of the Capital Purchase Program. The company received $3.4 billion in exchange for preferred stock and a warrant, aimed at strengthening its capital position during the 2008 financial crisis.

The company issued Series F Fixed Rate Cumulative Perpetual Preferred Stock with a liquidation preference of $25,000 per share. It accrues dividends at 5% annually for the first five years and 9% annually thereafter. Dividends are paid only when declared by the Board of Directors. The preferred stock is senior to common stock and generally non-voting.

Until the preferred stock is redeemed or transferred by the Treasury, Fifth Third Bancorp requires Treasury's consent to declare dividends on its common stock (above $0.15 per share) or to repurchase its common stock or other equity securities, with certain exceptions. The company must also ensure its executive compensation plans comply with the Emergency Economic Stabilization Act of 2008.

The warrant gives the Treasury the right to purchase up to 43,617,747 shares of Fifth Third's common stock at an exercise price of $11.72 per share. The number of shares underlying the warrant may be reduced by half if the company completes significant Qualified Equity Offerings by December 31, 2009. The warrant is immediately exercisable, subject to certain transfer limitations for the Treasury.