8-KShareholder MattersCorporate ChangesOther Events+1

SCHWAB CHARLES CORP 8-K Report, Rights Modification (Aug 3, 2015)

Filed August 3, 2015For Securities:SCHWSCHW-PDSCHW-PJ

Summary

The Charles Schwab Corporation (SCHW) filed an 8-K on August 3, 2015, to report the issuance and sale of 24,000,000 depositary shares. Each depositary share represents a 1/40th ownership interest in a share of Series C 6.00% non-cumulative perpetual preferred stock, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). The offering generated approximately $581 million in net proceeds after deducting underwriting discounts and expenses. This action reflects a strategic move to bolster capital through preferred equity issuance. Investors should note the key features of the Series C Preferred Stock, including its 6.00% dividend rate and its non-cumulative nature. Crucially, the terms of this preferred stock impose restrictions on the company's ability to pay dividends on, or repurchase/redeem, its common stock or other junior or parity preferred stock if it fails to declare and pay or set aside funds for dividends on the Series C Preferred Stock. This arrangement prioritizes distributions to Series C Preferred stockholders.

Key Highlights

  • 1Issued 24,000,000 depositary shares representing Series C 6.00% non-cumulative perpetual preferred stock.
  • 2Each depositary share represents a 1/40th interest in a share of preferred stock with a $1,000 liquidation preference.
  • 3Net proceeds from the offering totaled approximately $581 million after expenses.
  • 4The Series C Preferred Stock has a fixed dividend rate of 6.00%.
  • 5Dividends are non-cumulative, meaning missed payments are not made up later.
  • 6Restrictions are placed on common stock and junior/parity preferred stock dividends and repurchases if Series C dividends are not met.
  • 7The filing includes the Underwriting Agreement, Certificate of Designations, and Deposit Agreement as exhibits.

Frequently Asked Questions

The primary purpose was to report the completion of a public offering and sale of 24,000,000 depositary shares representing Series C 6.00% non-cumulative perpetual preferred stock, detailing the terms and associated agreements.

The company raised approximately $581 million in net proceeds from the sale of these depositary shares, after accounting for underwriting fees and offering expenses.

The 'non-cumulative' feature means that if The Charles Schwab Corporation does not declare and pay (or set aside funds for) the dividend for a particular dividend period, that missed dividend is forfeited by the preferred stockholders and will not be paid at a later date. This contrasts with cumulative preferred stock, where missed dividends accrue and must be paid before common stock dividends can be issued.

The Series C Preferred Stock's terms include a provision that restricts the company's ability to pay dividends on or repurchase its common stock (or other junior or parity preferred stock) if it fails to declare and pay, or set aside sufficient funds for, dividends on the Series C Preferred Stock for the preceding dividend period. This effectively gives the Series C Preferred Stock dividend priority over common stock dividends in certain situations.