What is the purpose of the Series B Mandatory Convertible Preferred Stock offering?

The Series B Mandatory Convertible Preferred Stock offering, along with the common stock offering, is a capital-raising initiative by Sempra Energy. The preferred stock provides a fixed dividend yield and is designed to convert into common stock, offering flexibility in the company's capital structure.

When will the Series B Mandatory Convertible Preferred Stock convert into common stock?

The Series B Mandatory Convertible Preferred Stock has a mandatory conversion date expected to be July 15, 2021. However, holders have the option to convert their shares into common stock prior to this date.

What are the implications of unpaid dividends on the Series B Mandatory Convertible Preferred Stock?

If dividends on the Series B Mandatory Convertible Preferred Stock go unpaid for six or more dividend periods (consecutive or not), the holders of this preferred stock, along with holders of other equal-ranking preferred stock, gain the right to elect two directors to the company's board. This right ceases once all accumulated dividends are paid.

How does the common stock offering differ from a typical stock sale?

The common stock offering includes forward sale agreements with financial institutions. This means Sempra Energy agreed to sell shares to these institutions, who then sell them to the public. Sempra Energy will then issue these shares to the forward purchasers at a later date (no later than December 15, 2019), at a predetermined price, subject to adjustments. This allows Sempra to secure capital now while deferring the actual issuance of shares.

SRE/SREA 8-K: Shareholder Matters & Corporate Changes

Summary

This 8-K filing by Sempra Energy (SRE) on July 13, 2018, primarily announces the establishment and terms of its 6.75% Mandatory Convertible Preferred Stock, Series B, and details significant equity and preferred stock offerings. The Series B Mandatory Convertible Preferred Stock carries a fixed dividend rate and is designed to convert into common stock on a mandatory basis by July 15, 2021, with options for early conversion by holders. Key provisions include restrictions on common stock dividends and repurchases until preferred stock dividends are paid, and voting rights for preferred stockholders if dividends are in arrears for six or more periods, allowing them to elect two directors. In addition to establishing the preferred stock, Sempra Energy launched a public offering of its common stock and an offering of the newly established Series B Mandatory Convertible Preferred Stock. These offerings were completed on July 13, 2018, involving the sale of 9,750,000 shares of common stock and 5,750,000 shares of Series B Mandatory Convertible Preferred Stock (including overallotment options exercised). The common stock offering was structured with forward sale agreements, allowing Sempra to issue shares at a later date, providing flexibility in capital raising.

Key Highlights

1Sempra Energy established and outlined the terms for its 6.75% Mandatory Convertible Preferred Stock, Series B, including dividend rates and mandatory conversion by July 15, 2021.
2A public offering of 9,750,000 shares of Sempra Energy's common stock was completed at a price of $113.75 per share.
3Concurrently, Sempra Energy offered 5,750,000 shares of its Series B Mandatory Convertible Preferred Stock at a public offering price of $100.00 per share.
4Holders of the Series B Mandatory Convertible Preferred Stock may elect to convert their shares into common stock prior to the mandatory conversion date.
5Restrictions are in place that prohibit dividends or repurchases of common stock if preferred stock dividends are not current.
6Preferred stockholders gain the right to elect two directors if six or more dividend periods go unpaid.
7The common stock offering involved forward sale agreements, allowing for delayed issuance of up to 9,750,000 shares to forward purchasers.

SEMPRA 8-K Report, Rights Modification (Jul 13, 2018)

Summary

Key Highlights

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