PNC Bank 2007 Annual Report Download - page 88

investments are provided in the Consolidated VIEs – PNC Is
Primary Beneficiary table and reflected in the “Other”
business segment.
We have a significant variable interest in certain other limited
partnerships that sponsor affordable housing projects. We do
not own a majority of the limited partnership interests in these
entities and are not the primary beneficiary. We use the equity
method to account for our investment in these entities.
Information regarding these partnership interests is reflected
in the Non-Consolidated VIEs – Significant Variable Interests
table.
P ERPETUAL T RUST S ECURITIES
We issue certain hybrid capital vehicles that qualify as capital
for regulatory ratios and rating agency purposes.
In December 2006, one of our indirect subsidiaries, PNC
REIT Corp., sold $500 million of 6.517% Fixed-to-Floating
Rate Non-Cumulative Exchangeable Perpetual Trust
Securities (the “Trust Securities”) of PNC Preferred Funding
Trust I (“Trust I”) in a private placement. PNC REIT Corp.
had previously acquired the Trust Securities from the trust in
exchange for an equivalent amount of Fixed-to-Floating Rate
Non-Cumulative Perpetual Preferred Securities (the “LLC
Preferred Securities”), of PNC Preferred Funding LLC, (the
“LLC”), held by PNC REIT Corp. The LLC’s initial material
assets consist of indirect interests in mortgages and mortgage-
related assets previously owned by PNC REIT Corp.
In March 2007, PNC Preferred Funding LLC sold $500
million of 6.113% Fixed-to-Floating Rate Non-Cumulative
Exchangeable Perpetual Trust Securities of PNC Preferred
Funding Trust II (“Trust II”) in a private placement. In
connection with the private placement, Trust II acquired $500
million of LLC Preferred Securities.
PNC REIT Corp. owns 100% of the LLC’s common voting
securities. As a result, the LLC is an indirect subsidiary of
PNC and is consolidated on our Consolidated Balance Sheet.
Trust I and Trust II’s investment in the LLC Preferred
Securities is characterized as a minority interest on our
Consolidated Balance Sheet since we are not the primary
beneficiary of Trust I or Trust II. This minority interest totaled
approximately $980 million at December 31, 2007.
PNC Bank, N.A. has contractually committed to Trust I that if
full dividends are not paid in a dividend period on the Trust
Securities, LLC Preferred Securities or any other parity equity
securities issued by the LLC, neither PNC Bank, N.A. nor its
subsidiaries will declare or pay dividends or other
distributions with respect to, or redeem, purchase or acquire or
make a liquidation payment with respect to, any of its equity
capital securities during the next succeeding period (other than
to holders of the LLC Preferred Securities and any parity
equity securities issued by the LLC) except: (i) in the case of
dividends payable to subsidiaries of PNC Bank, N.A., to PNC
Bank, N.A. or another wholly-owned subsidiary of PNC Bank,
N.A. or (ii) in the case of dividends payable to persons that are
not subsidiaries of PNC Bank, N.A., to such persons only if,
(A) in the case of a cash dividend, PNC has first irrevocably
committed to contribute amounts at least equal to such cash
dividend or (B) in the case of in-kind dividends payable by
PNC REIT Corp., PNC has committed to purchase such
in-kind dividend from the applicable PNC REIT Corp. holders
in exchange for a cash payment representing the market value
of such in-kind dividend, and PNC has committed to
contribute such in-kind dividend to PNC Bank, N.A.
PNC has contractually committed to Trust II that if full
dividends are not paid in a dividend period on the Trust II
Securities, or the LLC Preferred Securities held by Trust II,
PNC will not declare or pay dividends with respect to, or
redeem, purchase or acquire, any of its equity capital
securities during the next succeeding dividend period, other
than: (i) purchases, redemptions or other acquisitions of shares
of capital stock of PNC in connection with any employment
contract, benefit plan or other similar arrangement with or for
the benefit of employees, officers, directors or consultants,
(ii) purchases of shares of common stock of PNC pursuant to a
contractually binding requirement to buy stock existing prior
to the commencement of the extension period, including under
a contractually binding stock repurchase plan, (iii) any
dividend in connection with the implementation of a
shareholders’ rights plan, or the redemption or repurchase of
any rights under any such plan, (iv) as a result of an exchange
or conversion of any class or series of PNC’s capital stock for
any other class or series of PNC’s capital stock, (v) the
purchase of fractional interests in shares of PNC capital stock
pursuant to the conversion or exchange provisions of such
stock or the security being converted or exchanged or (vi) any
stock dividends paid by PNC where the dividend stock is the
same stock as that on which the dividend is being paid.
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