PNC Bank 2009 Annual Report Download - page 137

As part of the National City acquisition, PNC assumed
liability for the conversion of $1.4 billion of convertible senior
notes. Interest on these notes is payable semiannually at a
fixed rate of 4.0%. The maturity date of these notes is
February 1, 2011. PNC may not redeem these notes prior to
their maturity date. Holders may convert the notes, at their
option, prior to November 15, 2010 under certain
circumstances, including (i) if the trading price of the notes is
less than a defined threshold measured against the market
value of PNC common stock, (ii) any time after March 31,
2008, if the market price of PNC common stock exceeds
130% of the conversion price of the notes in effect on the last
trading day of the immediately preceding calendar quarter, or
(iii) upon the occurrence of certain specific events. After
November 15, 2010, the holders may convert their notes at
any time through the third scheduled trading date preceding
the maturity date. The initial conversion rate equals 2.0725
shares per $1,000 face value of notes. The conversion rate will
be subject to adjustment for stock splits, stock dividends, cash
dividends in excess of certain thresholds, stock repurchases
where the price exceeds market values, and certain other
events. Upon conversion, PNC will pay cash equal to the
principal balance of the notes and may issue shares of its
common stock for any conversion value, determined over a
40 day observation period, that exceeds the principal balance
of the notes being converted. The maximum number of net
common shares that PNC may be required to issue is
3.6 million shares, subject to potential adjustment in the case
of certain events, make-whole fundamental changes, or early
termination.
The holders of the convertible senior notes may elect: i) in the
case of a make-whole fundamental change, to convert the
notes prior to the effective time of such change, in which case
the conversion rate will be increased as provided by a formula
set forth in the indenture supplement governing the
convertible senior notes; or ii) upon the effective time of any
fundamental change, to require PNC to repurchase the
convertible senior notes at their principal amount plus accrued
but unpaid interest. Generally, a fundamental change includes
an acquisition of more than 50% of PNC’s common stock,
certain mergers, consolidations or other business
combinations, if PNC’s continuing directors are less than the
majority of the Board of Directors, a liquidation or
dissolution, or PNC’s common stock is not listed on any
US national securities exchange. These rights may discourage
a business combination or other transaction that is otherwise
favored by certain shareholders.
The $3.0 billion of junior subordinated debt included in the
above table represents the only debt redeemable prior to
maturity. The call price and related premiums are discussed in
Note 14 Capital Securities of Subsidiary Trusts.
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