8-KShareholder MattersCorporate ChangesOther Events+1

SCHWAB CHARLES CORP 8-K Report, Rights Modification (Mar 7, 2016)

Filed March 7, 2016For Securities:SCHWSCHW-PDSCHW-PJ

Summary

The Charles Schwab Corporation (SCHW) filed an 8-K on March 7, 2016, to report on the issuance of new preferred stock. Specifically, the company issued 30,000,000 depositary shares, each representing a 1/40th ownership interest in a share of 5.95% non-cumulative perpetual preferred stock, Series D. This offering raised approximately $725 million in net proceeds after deducting underwriting discounts and expenses. The filing details the establishment of the Series D Preferred Stock, outlining its dividend rate, perpetual nature, and liquidation preference. Importantly, the terms include restrictions on the company's ability to pay dividends or repurchase stock if dividends on the Series D Preferred Stock are not declared or paid. This issuance represents a significant capital-raising event for Schwab, intended to bolster its financial structure.

Key Highlights

  • 1Issuance of 30,000,000 depositary shares representing 5.95% non-cumulative perpetual preferred stock, Series D.
  • 2Net proceeds from the offering estimated at approximately $725 million.
  • 3The Series D Preferred Stock has a liquidation preference of $1,000 per share (equivalent to $25 per depositary share).
  • 4Dividends on the Series D Preferred Stock are non-cumulative.
  • 5Restrictions on common stock dividends and repurchases are in place if Series D preferred dividends are not paid.
  • 6The offering was conducted under an Underwriting Agreement with major financial institutions.
  • 7The filing includes key exhibits such as the Underwriting Agreement and the Certificate of Designations for the Series D Preferred Stock.

Frequently Asked Questions

The Series D Preferred Stock carries a dividend rate of 5.95% and is described as perpetual and non-cumulative. This means dividends are not guaranteed if not declared by the company, and any missed dividends are not accumulated for future payment.

The filing states that if the company fails to declare and pay (or set aside funds for) dividends on the Series D Preferred Stock for a preceding dividend period, it will face restrictions on paying dividends on, making distributions with respect to, or repurchasing its common stock or any parity or junior preferred stock. This prioritizes the payment of Series D preferred dividends.

The company raised approximately $725 million in net proceeds from the sale of the 30,000,000 depositary shares, after accounting for underwriting discounts and estimated offering expenses.

The Series D Preferred Stock has a liquidation preference of $1,000 per share, which translates to $25 per depositary share (since each depositary share represents a 1/40th interest in a share of preferred stock).