Summary
On October 31, 2017, The Charles Schwab Corporation (SCHW) announced the successful closing of a public offering of 500,000 depositary shares representing a 1/100th ownership interest in its newly established Series F Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock. The offering generated approximately $492 million in net proceeds after deducting underwriting fees and expenses. This issuance is significant as it allows the company to redeem all outstanding shares of its Series B 6.00% Non-Cumulative Perpetual Preferred Stock on December 1, 2017, effectively refinancing its preferred equity. The Series F Preferred Stock carries a 5.00% fixed rate initially, transitioning to a floating rate, and includes certain restrictions on common stock dividends if preferred dividends are not met. The filing also details the terms of the Series F Preferred Stock through a Certificate of Designations, outlining its voting rights, liquidation preferences, and dividend entitlements. This strategic move to refinance higher-cost preferred stock with new Series F Preferred Stock is aimed at optimizing the company's capital structure and potentially improving profitability by reducing interest expenses. Investors should note the structural aspects of preferred stock, including dividend priorities and redemption features, which are detailed in the associated filings.
Key Highlights
- 1Schwab successfully closed an offering of 500,000 depositary shares of Series F Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, raising approximately $492 million in net proceeds.
- 2The proceeds from the Series F Preferred Stock offering will be used to redeem all outstanding Series B 6.00% Non-Cumulative Perpetual Preferred Stock on December 1, 2017.
- 3The Series F Preferred Stock has a liquidation preference of $100,000 per share (or $1,000 per depositary share) and an initial dividend rate of 5.00% fixed, converting to a floating rate.
- 4Dividends on the Series F Preferred Stock are non-cumulative, meaning missed dividends are not carried forward.
- 5The company entered into an Underwriting Agreement with several major financial institutions, including Citigroup, Credit Suisse, and Goldman Sachs.
- 6The Series F Preferred Stock issuance imposes restrictions on common stock dividends if preferred dividends are not declared and paid.
- 7This move represents a refinancing of preferred equity, potentially optimizing Schwab's capital structure and reducing borrowing costs.