US Bank 2008 Annual Report Download - page 91

Note 14 JUNIOR SUBORDINATED DEBENTURES
As of December 31, 2008, the Company sponsored, and
wholly owned 100 percent of the common equity of, nine
trusts that were formed for the purpose of issuing Company-
obligated mandatorily redeemable preferred securities
(“Trust Preferred Securities”) to third-party investors and
investing the proceeds from the sale of the Trust Preferred
Securities solely in junior subordinated debt securities of the
Company (the “Debentures”). The Debentures held by the
trusts, which totaled $4.1 billion, are the sole assets of each
trust. The Company’s obligations under the Debentures and
related documents, taken together, constitute a full and
unconditional guarantee by the Company of the obligations
of the trusts. The guarantee covers the distributions and
payments on liquidation or redemption of the
Trust Preferred Securities, but only to the extent of funds
held by the trusts. The Company has the right to redeem the
Debentures in whole or in part, on or after specific dates, at
a redemption price specified in the indentures plus any
accrued but unpaid interest to the redemption date. The
Company used the proceeds from the sales of the
Debentures for general corporate purposes.
In connection with the formation of USB Capital IX,
the trust issued redeemable Income Trust Securities (“ITS”)
to third party investors, investing the proceeds in Debentures
issued by the Company and entered into stock purchase
contracts to purchase preferred stock to be issued by the
Company in the future. Pursuant to the stock purchase
contracts, the Company is required to make contract
payments of .65 percent, also payable semi-annually,
through a specified stock purchase date expected to be
April 15, 2011. Prior to the specified stock purchase date,
the trust is required to remarket and sell the Debentures to
third party investors to generate cash proceeds to satisfy its
obligation to purchase the Company’s Series A Non-
Cumulative Perpetual Preferred Stock (“Series A Preferred
Stock”) pursuant to the stock purchase contracts. The
Series A Preferred Stock, when issued pursuant to the stock
purchase contracts, is expected to pay quarterly dividends
equal to the greater of three-month LIBOR plus 1.02 percent
or 3.50 percent. In connection with this transaction, the
Company also entered into a replacement capital covenant
which restricts the Company’s rights to repurchase the ITS
and to redeem or repurchase the Series A Preferred Stock.
The following table is a summary of the Debentures included in long-term debt as of December 31, 2008:
Issuance Trust (Dollars in Millions) Issuance Date
Securities
Amount
Debentures
Amount Rate Type Rate Maturity Date
Earliest
Redemption Date
Retail
USB Capital XII . . . . . . . . . . February 2007 $ 535 $ 536 Fixed 6.30 February 2067 February 15, 2012
USB Capital XI . . . . . . . . . . August 2006 765 766 Fixed 6.60 September 2066 September 15, 2011
USB Capital X . . . . . . . . . . . April 2006 500 501 Fixed 6.50 April 2066 April 12, 2011
USB Capital VIII . . . . . . . . . December 2005 375 387 Fixed 6.35 December 2065 December 29, 2010
USB Capital VII . . . . . . . . . . August 2005 300 309 Fixed 5.88 August 2035 August 15, 2010
USB Capital VI . . . . . . . . . . March 2005 275 284 Fixed 5.75 March 2035 March 9, 2010
Vail Banks Statutory Trust II . . March 2001 7 7 Fixed 10.18 June 2031 June 8, 2011
Vail Banks Statutory Trust I . . February 2001 17 17 Fixed 10.20 February 2031 February 22, 2011
Institutional
USB Capital IX . . . . . . . . . . March 2006 1,250 1,251 Fixed 5.54 April 2042 April 15, 2015
Total . . . . . . . . . . . . . . . $4,024 $4,058
Note 15 SHAREHOLDERS’ EQUITY
At December 31, 2008 and 2007, the Company had
authority to issue 4 billion shares of common stock and
50 million shares of preferred stock. The Company had
1,755 million and 1,728 million shares of common stock
outstanding at December 31, 2008 and 2007, respectively,
and had 482 million shares reserved for future issuances,
primarily under stock option plans and shares that may be
issued in connection with the Company’s convertible senior
debentures, at December 31, 2008. At December 31, 2008,
the Company had 7 million shares of preferred stock
outstanding.
On March 27, 2006, the Company issued depositary
shares representing an ownership interest in 40,000 shares of
Series B Non-Cumulative Perpetual Preferred Stock with a
liquidation preference of $25,000 per share (the “Series B
Preferred Stock”), and on March 17, 2008, the Company
issued depositary shares representing an ownership interest
in 20,000 shares of Series D Non-Cumulative Perpetual
Preferred Stock with a liquidation preference of $25,000 per
share (the “Series D Preferred Stock”). The Series B
Preferred Stock and Series D Preferred Stock have no stated
maturity and will not be subject to any sinking fund or other
obligation of the Company. Dividends, if declared, will
accrue and be payable quarterly, in arrears, at a rate per
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