What is the purpose of establishing the Series C Preferred Stock?

The Series C Non-Cumulative Perpetual Preferred Stock was established by filing a Certificate of Designation to define its specific preferences, limitations, voting powers, and relative rights. This likely serves as a mechanism for potential future capital needs or as the preferred stock into which the Series A preferred securities can be exchanged under certain conditions.

What is the significance of the $500 million Series A preferred stock offering and its qualification as Tier 1 capital?

The $500 million Series A preferred stock offering by USB Realty Corp. is significant because it successfully raised substantial capital that qualifies as Tier 1 regulatory capital for U.S. Bank. This strengthens the bank's capital base, which is crucial for regulatory compliance, operational flexibility, and investor confidence. The proceeds are available for general corporate purposes, supporting the bank's ongoing business activities.

What does it mean for the Series A preferred securities to be 'exchangeable' under a 'Conditional Exchange Event'?

The Series A preferred securities can automatically convert into shares of Series C Preferred Stock if certain predefined 'Conditional Exchange Events' occur. These events are primarily triggered by regulatory concerns for U.S. Bank, such as becoming 'undercapitalized' under OCC regulations, being placed into conservatorship or receivership, or facing specific OCC directives that anticipate such issues or restrict dividend payments.

What is the purpose of the Replacement Capital Covenant?

The Replacement Capital Covenant (RCC) is a contractual agreement designed to protect existing debtholders. It prohibits U.S. Bancorp and its subsidiaries from repurchasing or redeeming the Series A preferred securities unless such actions are funded by the issuance of specific 'qualified securities' and adhere to other terms outlined in the covenant. This ensures that the capital raised through the Series A preferred stock is not prematurely or improperly withdrawn, maintaining the capital structure.

US BANCORP \DE\ 8-K: Corporate Changes

Summary

U.S. Bancorp (USB) filed an 8-K on December 21, 2006, detailing significant corporate actions related to its capital structure. The company established a new class of preferred stock, Series C Non-Cumulative Perpetual Preferred Stock, by filing a Certificate of Designation with the Delaware Secretary of State. This action outlines the specific terms and preferences for this new preferred stock series. Additionally, a subsidiary, USB Realty Corp., successfully closed a $500 million offering of Fixed-to-Floating Rate Exchangeable Non-Cumulative Perpetual Series A Preferred Stock, which qualifies as Tier 1 capital for regulatory purposes for U.S. Bank and is expected to be treated as Tier 1 capital at the company level. The proceeds from this offering are designated for general corporate purposes. In conjunction with the Series A preferred stock offering, U.S. Bancorp entered into a Replacement Capital Covenant (RCC). This covenant restricts the company and its subsidiaries from purchasing or redeeming the Series A preferred securities unless specific conditions are met, primarily related to the issuance of qualified replacement securities. This structure, including the exchangeable nature of the Series A preferred stock under certain regulatory conditions (Conditional Exchange Event) into Series C Preferred Stock, indicates strategic capital management and a focus on maintaining regulatory capital adequacy.

Key Highlights

1Establishment of Series C Non-Cumulative Perpetual Preferred Stock through a Certificate of Designation filed with Delaware.
2Closing of a $500 million offering of Series A Fixed-to-Floating Rate Exchangeable Non-Cumulative Perpetual Preferred Stock by subsidiary USB Realty Corp.
3Series A preferred securities recognized as Tier 1 bank regulatory capital for U.S. Bank and expected to be treated as Tier 1 capital at the company level.
4Proceeds from the Series A preferred stock offering will be used for general corporate purposes of U.S. Bank and its affiliates.
5Series A preferred securities are exchangeable into Series C Preferred Stock under specific regulatory 'Conditional Exchange Events', such as U.S. Bank becoming 'undercapitalized' or facing conservatorship.
6Execution of a Replacement Capital Covenant to restrict redemption of Series A preferred securities without issuing qualified replacement capital.
7The Series A preferred securities were offered privately to Qualified Institutional Buyers (QIBs) under Rule 144A.

US BANCORP \DE\ 8-K Report, Bylaw Amendment (Dec 22, 2006)

Summary

Key Highlights

Frequently Asked Questions