8-KLeadership ChangesMaterial AgreementsSecurities & Listing+2

STATE STREET CORP 8-K Report, Material Agreement (Oct 17, 2008)

Filed October 17, 2008For Securities:STTSTT-PG

Summary

State Street Corporation (STT) announced on October 17, 2008, its participation in the U.S. government's Troubled Asset Relief Program (TARP) Capital Purchase Program. The company agreed to issue $2 billion in senior preferred stock to the U.S. Department of the Treasury, along with warrants to purchase common stock valued at $300 million. This move is part of a broader government initiative to stabilize the U.S. economy and bolster confidence in financial institutions during a period of significant market stress. In conjunction with this investment, State Street committed to expanding credit to consumers and businesses and continuing efforts to modify residential mortgages. The senior preferred shares will qualify as Tier 1 capital and carry a dividend rate of 5% for the initial five years, increasing to 9% thereafter, with redemption possible after three years. The company also agreed to adhere to specific executive compensation and corporate governance requirements under Section 111 of the Emergency Economic Stability Act of 2008 for as long as the Treasury holds these securities. Additionally, the filing notes amendments to the company's by-laws to enhance shareholder notice requirements for proposed business and director nominations.

Key Highlights

  • 1State Street Corporation to receive $2 billion in capital from the U.S. Treasury under the TARP Capital Purchase Program.
  • 2Issuance includes $2 billion in senior preferred stock and warrants to purchase $300 million worth of common stock.
  • 3Senior preferred stock will qualify as Tier 1 capital and pay cumulative dividends.
  • 4The company committed to expanding credit flow to consumers and businesses and assisting with mortgage modifications.
  • 5State Street will be subject to executive compensation and corporate governance restrictions under TARP.
  • 6Warrants have a 10-year term and an exercise price based on a 20-day trailing average of common stock price.
  • 7Company's by-laws were amended to include enhanced shareholder notice requirements for proposals and nominations.

Frequently Asked Questions

State Street is participating in the TARP Capital Purchase Program as part of a U.S. government initiative to strengthen the financial system, boost public confidence, and support credit markets during a period of economic turmoil.

The U.S. Treasury will invest $2 billion in State Street by purchasing senior preferred stock. Additionally, State Street will issue warrants to the Treasury to purchase common stock with an aggregate market value of $300 million at the time of issuance. The preferred stock will carry a 5% dividend for the first five years, then 9%, and is redeemable after three years under certain conditions.

State Street will be subject to specific executive compensation and corporate governance requirements as outlined in Section 111 of the Emergency Economic Stability Act of 2008. This includes limitations on the compensation of its top executives and restrictions on increasing common stock dividend rates or repurchasing common stock without Treasury consent for a period.

The warrants give the U.S. Treasury the right to purchase State Street common stock at a predetermined price, based on a trailing market average. This provides the government with potential upside if State Street's stock performs well, and the number of shares underlying the warrants may be reduced if State Street raises significant capital through equity offerings.