Bread Financial is raising capital through an offering of preferred stock, pricing 5 million depositary shares tied to its new Series C preferred shares. The securities carry a 9.375% fixed-rate-reset dividend and are perpetual and non-cumulative.
The offering is expected to bring in about $120.2 million after underwriting discounts and estimated expenses, before any additional shares are sold under the underwriters’ option. Bread Financial plans to use the proceeds for general corporate purposes, potentially including funding its subsidiary bank, Comenity Capital Bank, and repurchasing shares.
Key details
- Each depositary share represents a 1/40th interest in a Series C preferred share and has a $25 liquidation preference. A full preferred share has a $1,000 liquidation preference.
- The stated 9.375% rate equates to $2.34375 a year per depositary share if dividends are declared and paid. Because the shares are non-cumulative, skipped dividends do not accrue for later payment. The rate is designed to reset, though the announcement does not specify the reset date or terms.
- The underwriters have 30 days from October 27 to buy up to 750,000 additional depositary shares at the same price. The expected net proceeds of about $120.2 million assume they do not exercise that option.
- The sale is expected to close on November 3, subject to customary closing conditions. Bread Financial expects to apply to list the depositary shares on the New York Stock Exchange.
- The proceeds may be contributed or lent to Comenity Capital Bank, or used for share repurchases, among other general corporate purposes.
What changes
The financing adds preferred stock to Bread Financial’s capital structure; it is not an issuance of common shares. Preferred holders have a stated dividend rate and liquidation preference, while the perpetual term means the securities have no stated maturity. The company has not specified how much, if any, of the proceeds will go to the bank or to share repurchases.