8-KSecurities & ListingCorporate ChangesExhibits & Filings

PNC FINANCIAL SERVICES GROUP, INC. 8-K Report, Unregistered Securities Sale (Mar 28, 2007)

Filed March 28, 2007For Securities:PNC

Summary

PNC Financial Services Group, Inc. (PNC) filed an 8-K on March 27, 2007, reporting on the unregistered sale of equity securities and an amendment to its Articles of Incorporation. The primary event involves the issuance of $500 million of Fixed-to-Floating Rate Non-Cumulative Exchangeable Perpetual Trust Securities by its indirect subsidiary, PNC Preferred Funding LLC, through PNC Delaware II. These trust securities are backed by preferred securities of the subsidiary, which in turn holds indirect interests in mortgages and mortgage-related assets. This structure is designed to provide regulatory capital for PNC Bank. The filing also details the authorization of Series I Non-Cumulative Perpetual Preferred Stock, which could be issued by PNC in exchange for the Trust Securities under specific "Conditional Exchange Events" related to the capital adequacy of PNC Bank, N.A., as determined by the Office of the Comptroller of the Currency (OCC). This Series I Preferred Stock is intended to qualify as Tier 1 bank regulatory capital for PNC Bank, subject to limitations.

Key Highlights

  • 1PNC issued $500 million in Trust Securities via its subsidiary PNC Preferred Funding LLC, backed by mortgage-related assets.
  • 2The Trust Securities are offered to qualified institutional buyers and qualified purchasers under Rule 144A.
  • 3Dividends on the Trust Securities are fixed at 6.113% until March 15, 2012, then float at 3-month USD LIBOR plus 1.2225%.
  • 4PNC authorized 5,000 shares of Series I Non-Cumulative Perpetual Preferred Stock.
  • 5Series I Preferred Stock can be issued in exchange for Trust Securities if PNC Bank faces specific regulatory capital issues (Conditional Exchange Event).
  • 6The Series I Preferred Stock is intended to qualify as Tier 1 regulatory capital for PNC Bank, with potential Tier 2 treatment initially.
  • 7The issuance of Series I Preferred Stock involves specific redemption and dividend provisions, including potential voting rights for preferred stockholders if dividends are missed.

Frequently Asked Questions

The primary purpose of issuing these Trust Securities is to raise capital that qualifies as regulatory capital for PNC Bank, N.A., specifically intended to bolster its Tier 1 capital.

Conditional Exchange Events are specific regulatory conditions related to PNC Bank's capital adequacy. These include the bank becoming 'undercapitalized' under OCC regulations, being placed into conservatorship or receivership, or the OCC directing an exchange in anticipation of such events or supervisory actions limiting dividend payments.

The transaction is structured so that the subsidiary's preferred securities are treated as a minority interest. PNC has received confirmation that this minority interest will qualify as Tier 1 bank regulatory capital for PNC Bank, subject to certain quantitative limits on innovative capital instruments. Initially, due to existing innovative capital, it was expected to be treated as Tier 2 capital.

Both the Trust Securities and the potential Series I Preferred Stock have a non-cumulative dividend structure. They pay a fixed rate of 6.113% annually until March 15, 2012, after which the rate becomes floating (3-month USD LIBOR + 1.2225%). Dividends are payable quarterly if declared by the issuer's board of managers or directors out of legally available funds.