PNC Bank 2008 Annual Report Download - page 140

N OTE 19 S HAREHOLDERS ’E QUITY
Preferred Stock
Information related to preferred stock is as follows:
Preferred Shares
December 31
Shares in thousands
Liquidation
value per
share 2008 2007
Authorized
$1 par value 16,960 16,985
Issued and outstanding
Series A $ 40 67
Series B 40 11
Series C 20 119 128
Series D 20 171 186
Series K 10,000 50
Series L 100,000 2
Series N 100,000 76
Total issued and outstanding 425 322
On December 31, 2008, we issued $7.6 billion of Fixed Rate
Cumulative Perpetual Preferred Stock, Series N, to the US
Treasury under the US Treasury’s Troubled Asset Relief
Program (“TARP”) Capital Purchase Program, together with a
warrant to purchase shares of common stock of PNC
described below. Series N dividends are payable on the 15th of
February, May, August and November beginning February 15,
2009. Dividends will be paid at a rate of 5.00% through
February 15, 2014 and 9.00% thereafter. This preferred stock
is redeemable at par plus accrued and unpaid dividends
subject to the approval of our primary banking regulators.
Under the TARP Capital Purchase Program, there are
restrictions on common and preferred dividends and common
share repurchases associated with the preferred stock issued to
the US Treasury. As is typical with cumulative preferred
stock, dividend payments for this preferred stock must be
current before dividends can be paid on junior shares,
including our common stock, or junior shares can be
repurchased or redeemed. Also, the US Treasury’s consent is
required for any increase in common dividends per share
above the most recent level prior to October 14, 2008 until the
third anniversary of the preferred stock issuance as long as the
US Treasury continues to hold any of the preferred stock.
Further, during that same period, the US Treasury’s consent is
required, unless the preferred stock is no longer held by the
US Treasury, for any share repurchases with limited
exceptions, most significantly purchases of common shares in
connection with any benefit plan in the ordinary course of
business consistent with past practice.
As part of the National City transaction, we issued 9.875%
Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series L in exchange for National City’s Fixed-to-Floating
Rate Non-Cumulative Preferred Stock, Series F. Dividends are
payable if and when declared each 1st of February, May,
August and November. Dividends will be paid at a rate of
9.875% prior to February 1, 2013 and at a rate of three-month
LIBOR plus 633 basis points beginning February 1, 2013. The
Series L is redeemable at PNC’s option, subject to a
replacement capital covenant for the first ten years after
issuance and subject to Federal Reserve approval, if then
applicable, on or after February 1, 2013 at a redemption price
per share equal to the liquidation preference plus any declared
but unpaid dividends.
Also as part of the National City transaction, we established
the PNC Non-Cumulative Perpetual Preferred Stock, Series
M, which mirrors in all material respects the former National
City Non-Cumulative Perpetual Preferred Stock, Series E.
PNC has designated 5,751preferred shares, liquidation value
$100,000 per share, for this series. No shares have yet been
issued; however, National City issued stock purchase
contracts for 5,001 shares of its Series E Preferred Stock (now
replaced by the PNC Series M as part of the National City
transaction) to the National City Preferred Capital Trust I in
connection with the issuance by that Trust of $500 million of
12.000% Fixed-to-Floating Rate Normal Automatic Preferred
Enhanced Capital Securities (the “Normal APEX Securities”)
in January 2008 by the Trust. It is expected that the Trust will
purchase 5,001 of the Series M preferred shares pursuant to
these stock purchase contracts on December 10, 2012 or on an
earlier date and possibly as late as December 10, 2013. The
Trust has pledged the $500,100,000 principal amount of
National City 8.729% Junior Subordinated Notes due 2043
held by the Trust and their proceeds to secure this purchase
obligation.
If Series M shares are issued prior to December 10, 2012, any
dividends on such shares will be calculated at a rate per
annum equal to 12.000% until December 10, 2012, and
thereafter, at a rate per annum that will be reset quarterly and
will equal three-month LIBOR for the related dividend period
plus 8.610%. Dividends will be payable if and when declared
by the Board at the dividend rate so indicated applied to the
liquidation preference per share of the Series M Preferred
Stock. The Series M is redeemable at PNC’s option, subject to
a replacement capital covenant for the first ten years after
issuance and subject to Federal Reserve approval, if then
applicable, on or after December 10, 2012 at a redemption
price per share equal to the liquidation preference plus any
declared but unpaid dividends.
As a result of the National City transaction, we assumed
National City’s obligations under replacement capital
covenants with respect to (i) the Normal APEX Securities and
our Series M shares and (ii) National City’s 6,000,000 of
Depositary Shares (each representing 1/4000th of an interest
in a share of our 9.875% Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series L), whereby we
agreed not to cause the redemption or repurchase of the
Normal APEX or Depositary Shares, as applicable, or the
underlying Preferred Stock and/or junior subordinated notes,
as applicable, unless such repurchases or redemptions are
made from the proceeds of the issuance of certain qualified
securities and pursuant to the other terms and conditions set
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