What are "Replacement Capital Covenants" and why are they important?

Replacement Capital Covenants are contractual agreements entered into by U.S. Bancorp in connection with the issuance of certain trust preferred securities and preferred stock. They require the company to maintain a specific level of "covered debt" with a maturity of at least two years from the designation date. These covenants are important for investors in the associated securities as they help ensure a certain level of capital is maintained within the company, potentially supporting the reliability of those investments.

Why did U.S. Bancorp change its "covered debt"?

The company changed its covered debt because its previous designation, the 1.125% Medium-Term Notes due October 30, 2013, would soon fall below the two-year maturity requirement stipulated in the Replacement Capital Covenants. By redesignating the 6.625% Junior Subordinated Debentures due 2039, U.S. Bancorp ensured ongoing compliance with these covenants.

Does this change affect the existing trust preferred securities or preferred stock?

This filing primarily addresses a procedural requirement related to the underlying debt instruments for the trust preferred securities and preferred stock. While the direct impact on the existing securities is procedural, it ensures that the terms of the Replacement Capital Covenants continue to be met, which is indirectly supportive of the investors in those securities.

What is the significance of the 6.625% Junior Subordinated Debentures due 2039?

These debentures are now designated as the "covered debt" for the Replacement Capital Covenants. They underlie the 6.625% Trust Preferred Securities of USB Capital XIII. By serving as the covered debt, they meet the requirements of the covenants, ensuring that U.S. Bancorp maintains compliance with its obligations to holders of certain trust preferred securities.

US BANCORP \DE\ 8-K SEC Disclosure

Summary

This Form 8-K filing from U.S. Bancorp (USB) on November 30, 2011, primarily concerns the modification of its "Replacement Capital Covenants." These covenants are linked to various trust preferred securities and preferred stock issuances dating back to 2006. The key event reported is the change in the designated "covered debt" under these covenants. Previously, U.S. Bancorp's 1.125% Medium-Term Notes, Series R, due October 30, 2013, served as the covered debt. As of October 30, 2011, these notes no longer qualify due to their proximity to maturity. Consequently, the Company has redesignated its 6.625% Junior Subordinated Debentures due 2039, which underlie the 6.625% Trust Preferred Securities of USB Capital XIII, as the new covered debt in accordance with the covenant terms. This action is a procedural requirement to maintain compliance with the terms of the Replacement Capital Covenants.

Key Highlights

1U.S. Bancorp has updated its "Replacement Capital Covenants" due to the approaching maturity of its previously designated covered debt.
2The 1.125% Medium-Term Notes, Series R, due October 30, 2013, are no longer designated as covered debt.
3The 6.625% Junior Subordinated Debentures due 2039 have been redesignated as the new covered debt.
4This change is to comply with provisions requiring covered debt to have a maturity of at least two years from the designation date.
5The redesignated debentures underlie the 6.625% Trust Preferred Securities of USB Capital XIII.
6The filing serves as notification of this procedural change related to U.S. Bancorp's debt instruments and associated covenants.

US BANCORP \DE\ 8-K Report, Corporate Update (Nov 30, 2011)

Summary

Key Highlights

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