8-KSecurities & ListingExhibits & Filings

US BANCORP \DE\ 8-K Report, Unregistered Securities Sale (Dec 9, 2005)

Filed December 9, 2005For Securities:USBUSB-PHUSB-PPUSB-PRUSB-PQUSB-PSUSB-PA

Summary

U.S. Bancorp (USB) filed an 8-K report on December 8, 2005, detailing a significant private placement of $2 billion in floating rate convertible senior debentures due 2035, with an option for an additional $500 million. This offering was made to qualified institutional buyers under Rule 144A, indicating a strategic move to raise capital. The debentures carry a variable interest rate tied to three-month LIBOR minus 1.46%, with a floor of zero percent, and interest payments will commence in December 2006. Key for investors is the convertible feature. The debentures can be converted into U.S. Bancorp common stock, with an initial conversion price of $36.85, representing a roughly 20% premium over the market price at the time of issuance. Conversion will only result in stock issuance if the market price exceeds this premium, otherwise, cash settlement is an option. This structure suggests the company believes its stock price will appreciate, offering investors a convertible instrument with potential upside participation.

Key Highlights

  • 1U.S. Bancorp priced a $2 billion private placement of floating rate convertible senior debentures due 2035.
  • 2An overallotment option for an additional $500 million of debentures was granted to initial purchasers.
  • 3The debentures were sold to qualified institutional buyers under Rule 144A.
  • 4Interest on the debentures will be at three-month LIBOR minus 1.46%, resetting quarterly, with a minimum rate of 0%.
  • 5The debentures are convertible into U.S. Bancorp common stock at an initial conversion price of $36.85.
  • 6The initial conversion price represents a premium of approximately 20% over the market price at the time of issuance.
  • 7The company has the option to cash settle all or a portion of its delivery obligations upon conversion.

Frequently Asked Questions

The main event is the pricing and subsequent closing of a private placement of $2 billion in floating rate convertible senior debentures due 2035 by U.S. Bancorp.

The debentures bear interest at a floating rate of three-month LIBOR minus 1.46% (with a floor of 0%), reset quarterly. They are convertible into U.S. Bancorp common stock at an initial conversion price of $36.85, which was a 20% premium to the market price at issuance. Interest payments begin December 11, 2006.

The debentures were sold in a private placement, pursuant to Section 4(2) of the Securities Act, to initial purchasers who then resold them to 'qualified institutional buyers' in accordance with Rule 144A under the Securities Act.

The initial conversion price of $36.85 represents a 20% premium over the market price at issuance. This means holders will only receive common stock upon conversion if the market price of U.S. Bancorp's stock rises above $36.85. Until then, or if the stock does not reach that level, conversion might be settled in cash, up to the principal amount, with the company retaining flexibility.