8-KShareholder MattersCorporate ChangesOther Events+1

SCHWAB CHARLES CORP 8-K Report, Rights Modification (Jun 6, 2012)

Filed June 6, 2012For Securities:SCHWSCHW-PDSCHW-PJ

Summary

The Charles Schwab Corporation (SCHW) filed an 8-K on June 6, 2012, to report on a significant capital raise through the issuance of preferred stock. Specifically, the company issued 17,000,000 depositary shares, each representing a 1/40th ownership interest in its 6.00% Non-Cumulative Perpetual Preferred Stock, Series B. This offering, facilitated by an underwriting agreement with several major financial institutions, resulted in net proceeds of approximately $411 million after deducting fees and expenses. The filing also details the establishment of the Series B Preferred Stock through a Certificate of Designations, which outlines the specific rights, preferences, and limitations associated with this new class of stock. A key feature highlighted is the non-cumulative nature of the dividends, meaning that if the company does not declare and pay dividends for a given period, those missed payments are not owed to holders later. This issuance effectively modifies the company's capital structure and is important for investors to understand regarding dividend policies and potential restrictions on common stock distributions.

Key Highlights

  • 1The Charles Schwab Corporation issued 17,000,000 depositary shares representing 6.00% Non-Cumulative Perpetual Preferred Stock, Series B.
  • 2The offering generated approximately $411 million in net proceeds.
  • 3The Series B Preferred Stock has a liquidation preference of $1,000 per share (equivalent to $25 per depositary share).
  • 4Dividends on the Series B Preferred Stock are non-cumulative, meaning missed payments are not carried forward.
  • 5The issuance of this preferred stock may impose restrictions on the company's ability to pay dividends on, repurchase, or redeem its common stock or junior preferred stock if Series B dividends are not met.
  • 6The filing includes the Underwriting Agreement, Certificate of Designations, and Deposit Agreement as exhibits.

Frequently Asked Questions

This 8-K filing reports on The Charles Schwab Corporation's issuance of new preferred stock (Series B) and related depositary shares, detailing the terms of the offering, the capital raised, and the establishment of the preferred stock's rights and preferences.

The company raised approximately $411 million in net proceeds from the sale of 17,000,000 depositary shares, after accounting for underwriting discounts, commissions, and offering expenses.

The Series B Preferred Stock pays a 6.00% dividend annually, is perpetual (has no maturity date), and its dividends are non-cumulative. This means that if the company skips a dividend payment, that payment is forfeited and not owed to holders in the future.

The terms of the Series B Preferred Stock impose restrictions. If Schwab fails to declare and pay (or set aside funds for) the Series B preferred dividends for a given period, the company's ability to pay dividends on, repurchase, or redeem its common stock or any stock junior to the Series B preferred stock will be restricted.