8-KMaterial AgreementsShareholder MattersCorporate Changes+1

Public Storage 8-K Report, Material Agreement (Aug 2, 2017)

Filed August 2, 2017For Securities:PSAPSA-PRPSA-PFPSA-PGPSA-PHPSA-PIPSA-PJPSA-PMPSA-PNPSA-POPSA-PPPSA-PQPSA-PSPSA-PKPSA-PL

Summary

Public Storage (PSA) filed an 8-K on August 1, 2017, to report the entry into a material definitive agreement for the sale of 12,000,000 depositary shares representing 5.05% Cumulative Preferred Shares, Series G. This offering, underwritten by major financial institutions, provides Public Storage with a significant capital raise. The filing also details the terms of these preferred shares, including potential restrictions on distributions to junior or parity securities if preferred dividends are not declared, and notes the filing of Articles Supplementary to designate these shares. This move signals a proactive approach by Public Storage to strengthen its balance sheet and potentially fund future growth or strategic initiatives. Investors should note that the issuance of these preferred shares introduces a new class of capital with specific dividend and distribution rights. The terms suggest a priority claim on distributions before common equity, which could impact future dividend payouts to common shareholders, especially in scenarios where preferred dividends are not met. The inclusion of an over-allotment option for underwriters indicates strong demand expectations for this offering.

Key Highlights

  • 1Public Storage entered into an Underwriting Agreement on July 31, 2017, to sell 12,000,000 depositary shares.
  • 2These depositary shares represent 1/1,000th of a 5.05% Cumulative Preferred Share of Beneficial Interest, Series G.
  • 3The offering includes an option for underwriters to purchase up to 1,800,000 additional depositary shares to cover over-allotments.
  • 4On August 1, 2017, Articles Supplementary were filed to designate 13,800 preferred shares as the 5.05% Cumulative Preferred Shares, Series G.
  • 5The issuance of these preferred shares may impose restrictions on the company's ability to make distributions on junior or parity securities if preferred dividends are not declared.
  • 6Major financial institutions, including Merrill Lynch, Morgan Stanley, UBS, and Wells Fargo, are acting as underwriters.
  • 7The filing clarifies the existence of affiliated lenders within the underwriting group, who are also participants in the company's existing credit facilities.

Frequently Asked Questions

The primary purpose of this 8-K filing is to report the entry into a material definitive agreement for the public offering and sale of 12,000,000 depositary shares, which represent a new series of preferred stock (5.05% Cumulative Preferred Shares, Series G). It also details the legal designation of these shares.

The depositary shares represent a 5.05% Cumulative Preferred Share of Beneficial Interest, Series G. The key term highlighted is that the company's ability to make distributions on, redeem, purchase, or acquire, or make a liquidation payment on, any shares junior to or on parity with these preferred shares will be subject to certain restrictions if the company fails to declare distributions on the preferred shares during any distribution period.

The over-allotment option grants the underwriters the right to purchase up to an additional 1,800,000 depositary shares. For the company, this provides an opportunity to raise additional capital if there is strong investor demand for the offering. For investors, it suggests that the underwriters anticipate high demand and are prepared to meet it by potentially selling more shares than initially planned.

The issuance of preferred stock creates a new class of security with preferential rights. Specifically, if Public Storage does not declare distributions on its preferred shares, it faces restrictions on distributions to junior or parity securities. This could mean that common shareholders might see fewer or no distributions, especially in tighter financial periods, until the preferred dividend obligations are met.