Introductory Note
On March 30, 2021, The Charles Schwab Corporation (“CSC”) issued and sold 24,000,000 depositary shares (“Depositary Shares”), each representing a 1/40th ownership interest in a share of 4.450% non-cumulative perpetual preferred stock, Series J, $0.01 par value per share, with a liquidation preference of $1,000 per share (equivalent to $25 per Depositary Share) (the “Series J Preferred Stock”). The net proceeds of the offering of the 24,000,000 Depositary Shares were approximately $583,500,000, after deducting underwriting discounts and commissions and estimated offering expenses. This issuance is referred to as the “Preferred Issuance.”
| Item 3.03 | Material Modification to Rights of Security Holders |
In connection with the Preferred Issuance, CSC filed a Certificate of Designations (the “Certificate of Designations”) with the Secretary of State of the State of Delaware, establishing the voting rights, powers, preferences and privileges, and the relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of the Series J Preferred Stock on March 29, 2021. Holders of the Depositary Shares will be entitled to all proportional rights and preferences of the Series J Preferred Stock (including dividend, voting, redemption and liquidation rights).
Under the terms of the Series J Preferred Stock, the ability of CSC to pay dividends on, make distributions with respect to, or to repurchase, redeem or acquire its common stock, nonvoting common stock or any preferred stock ranking on parity with or junior to the Series J Preferred Stock, is subject to restrictions in the event that CSC does not declare and either pay or set aside a sum sufficient for payment of dividends on the Series J Preferred Stock for the immediately preceding dividend period.
The terms of the Series J Preferred Stock are more fully described in the Certificate of Designations which is included as Exhibit 3.1 to this Current Report on Form 8–K and is incorporated by reference herein.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year |
The Certificate of Designations became effective upon filing with the Secretary of State of the State of Delaware. The terms of the Series J Preferred Stock are more fully described in the Certificate of Designations which is included as Exhibit 3.1 to this Current Report on Form 8–K and is incorporated by reference herein.
Preferred Underwriting Agreement and other Preferred Issuance Information
On March 23, 2021, in connection with the Preferred Issuance, CSC entered into an Underwriting Agreement (the “Preferred Underwriting Agreement”) with BofA Securities, Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC as the representatives of the several underwriters named therein (collectively, the “Preferred Underwriters”), under which CSC agreed to sell to the Preferred Underwriters 24,000,000 shares of Depositary Shares, each representing a 1/40th ownership interest in a share of Series J Preferred Stock.
The Preferred Underwriting Agreement contains customary representations, warranties and agreements of CSC, conditions to closing, indemnification rights and obligations of the parties, and termination provisions. Under the terms of the Preferred Underwriting Agreement, CSC agreed to indemnify the Preferred Underwriters against certain specified types of liabilities, including liabilities under the Securities Act of 1933, as amended, and to contribute to payments the Preferred Underwriters may be required to make in respect of these liabilities.
