PNC Bank 2006 Annual Report Download - page 108

During February 2007, in connection with our planned
acquisition of Mercantile, we issued $1.9 billion of debt to
fund the cash portion of this transaction, comprised of the
following:
• On February 1, 2007, we issued $775 million of
floating rate senior notes due January 2012. Interest
will be reset quarterly to 3-month LIBOR plus 14
basis points and interest will be paid quarterly.
• Also on February 1, 2007, we issued $500 million of
floating rate senior notes due January 2014. Interest
will be reset quarterly to 3-month LIBOR plus 20
basis points and will be paid quarterly.
• On February 8, 2007, we issued $600 million of
subordinated notes due February 2017. These notes
pay interest semiannually at a fixed rate of 5.625%.
See Note 2 Acquisitions for additional information regarding
Mercantile.
N OTE 14 C APITAL S ECURITIES OF
S UBSIDIARY T RUSTS
In December 2006, we elected to redeem all of the underlying
Capital Securities related to the PNC Institutional Capital
Trust A, UNB Capital Statutory Trust II, and Riggs Capital
Trust I. The total Capital Securities redeemed totaled $453
million.
At December 31, 2006, the following capital securities
represent non-voting preferred beneficial interests in the assets
of PNC Institutional Capital Trust B, PNC Capital Trusts C
and D, UNB Capital Trust I, and the Riggs Capital Trust II
(the “Trusts”). All of these Trusts are wholly owned finance
subsidiaries of PNC. UNB Capital Trust I was acquired
effective January 1, 2004 as part of the United National
acquisition. Riggs Capital Trust II was acquired in May 2005
as part of the Riggs acquisition. In the event of certain
changes or amendments to regulatory requirements or federal
tax rules, the capital securities are redeemable in whole. The
financial statements of the Trusts are not included in PNC’s
consolidated financial statements in accordance with GAAP.
• Trust B, formed in May 1997, issued $300 million of
8.315% capital securities due May 15, 2027, that are
redeemable after May 15, 2007 at a premium that
declines from 104.1575% to par on or after May 15,
2017.
• Trust C, formed in June 1998, issued $200 million of
capital securities due June 1, 2028, bearing interest at a
floating rate per annum equal to 3-month LIBOR plus
57 basis points. The rate in effect at December 31,
2006 was 5.94%. Trust C Capital Securities are
redeemable on or after June 1, 2008 at par.
• Trust D, formed in December 2003, issued $300
million of 6.125% capital securities due
December 15, 2033 that are redeemable on or after
December 18, 2008 at par.
• UNB Capital Trust I, formed in March 1997 with $16
million outstanding of 10.01% capital securities due
March 15, 2027, that are redeemable on or after
March 15, 2007 at a premium that declines from
105.00% to par on or after March 15, 2017. PNC has
delivered redemption notices to the related trustee to
redeem all of these securities on March 15, 2007.
• Riggs Capital Trust II was formed in March 1997
when $200 million of 8
7
⁄ 8 % capital securities were
issued. These securities are due March 15, 2027, and
are redeemable after March 15, 2007 at a premium
that declines from 104.438% to par on or after
March 15, 2017. Riggs had acquired less than 50% of
the capital securities and, therefore, under FIN 46R
PNC is not deemed to be the primary beneficiary.
Accordingly, the financial statements of this Trust are
not consolidated into PNC’s financial results. Junior
subordinated debt of $206 million owed by PNC to
this Trust is included in PNC’s balance sheet, with
the related service cost included in interest expense.
The $50 million of acquired capital securities are
included as securities available for sale, with the
related dividends included in interest income. PNC
has delivered redemption notices to the related
trustee to redeem all of these securities on March 15,
2007.
At December 31, 2006, PNC’s junior subordinated debt of
$1.1 billion represented debentures issued by PNC and
purchased and held as assets by the Trusts.
The obligations of the respective parent of each Trust, when
taken collectively, are the equivalent of a full and
unconditional guarantee of the obligations of such Trust under
the terms of the Capital Securities. Such guarantee is
subordinate in right of payment in the same manner as other
junior subordinated debt. There are certain restrictions on
PNC’s overall ability to obtain funds from its subsidiaries. For
additional disclosure on these funding restrictions, including
an explanation of dividend and intercompany loan limitations,
see Note 4 Regulatory Matters.
N OTE 15 S HAREHOLDERS ’E QUITY
Information related to preferred stock is as follows:
Preferred Shares
December 31
Shares in thousands
Liquidation
value per share 2006 2005
Authorized
$1 par value 17,012 17,030
Issued and outstanding
Series A $40 77
Series B 40 22
Series C 20 144 152
Series D 20 196 206
Total issued and outstanding 349 367
Series A through D are cumulative and, except for Series B, are
redeemable at our option. Annual dividends on Series A, B and
D preferred stock total $1.80 per share and on Series C
preferred stock total $1.60 per share. Holders of Series A
98