What are Replacement Capital Covenants (RCCs)?

Replacement Capital Covenants (RCCs) are contractual provisions, often associated with debt issuances, that may require a company to use a certain amount of equity capital for "replacement" purposes (e.g., to redeem debt) before it can redeem certain junior debt. They are designed to maintain a certain level of equity in the capital structure. In this case, they were linked to U.S. Bancorp's preferred stock issuances.

Why did U.S. Bancorp terminate the RCCs?

U.S. Bancorp terminated the RCCs because it designated its 2.375% Medium-Term Notes, Series V (Senior), due 2026, as 'Covered Debt'. The terms of these notes, and the original RCC agreements, allowed for the termination of the RCCs when new debt was designated as 'Covered Debt'.

What is the impact of this termination on U.S. Bancorp's financial position?

This filing primarily addresses a change in debt covenants and does not directly report financial results. The termination of RCCs allows U.S. Bancorp greater flexibility in its capital management and potentially removes certain restrictions on its ability to redeem debt or manage its equity structure, though specific financial implications would depend on the details of the original covenants and the company's future actions.

Are there any costs associated with this termination?

According to the filing, the designation of the new notes as 'Covered Debt' allows the company to terminate the RCCs 'without further action by or payment to any holders of the Notes'. This suggests that, based on the agreements in place, no additional payment was required to effect this termination.

US BANCORP \DE\ 8-K SEC Disclosure

Summary

U.S. Bancorp filed an 8-K on October 28, 2016, to report on the termination of its Replacement Capital Covenants (RCCs). These covenants were originally established in connection with the issuance of preferred stock in 2010, 2012, and 2013. The company has designated its 2.375% Medium-Term Notes, Series V (Senior), due July 22, 2026, as "Covered Debt" under these RCCs. This designation triggers a provision within the notes that allows U.S. Bancorp to terminate the RCCs without further action or payment to the noteholders. The company has exercised this right and executed a "Termination of Replacement Capital Covenants" agreement dated October 28, 2016. This action effectively concludes the obligations associated with the prior RCCs, which were previously linked to the company's preferred stock issuances. Investors should note that this filing primarily concerns changes to debt covenants and does not appear to involve any new financial results or operational updates.

Key Highlights

1U.S. Bancorp has terminated its Replacement Capital Covenants (RCCs) effective October 28, 2016.
2The termination is a result of designating the 2.375% Medium-Term Notes, Series V (Senior), due 2026, as 'Covered Debt'.
3The original RCCs were established in connection with preferred stock issuances in 2010, 2012, and 2013.
4The designation of the new notes as 'Covered Debt' allows the company to terminate the RCCs without additional payments to noteholders.
5The previous 'Covered Debt' was the 1.95% Medium-Term Notes, Series T (Senior), due 2018.
6A formal 'Termination of Replacement Capital Covenants' document, dated October 28, 2016, has been filed as an exhibit.
7This filing is primarily a procedural update regarding debt covenants and not a financial results release.

US BANCORP \DE\ 8-K Report, Corporate Update (Oct 28, 2016)

Summary

Key Highlights

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