State Street Corporation Announces Issuance of Preferred Stock

Rhea-AI Summary

State Street Corporation (STT) has announced the issuance of $1.5 billion of depositary shares, each representing a 1/100th ownership interest in a share of its 6.700% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series I. The offering was structured in line with the company's inclusion, diversity, and equity efforts, with diverse underwriters involved. Dividends on the Series I Preferred Stock will be payable quarterly, with a fixed rate of 6.700% per annum until March 15, 2029, and then reset based on the five-year U.S. Treasury rate plus a spread of 2.613%. State Street may redeem the Series I Preferred Stock in the future.

Insights

Financial Analyst

State Street Corporation's issuance of $1.5 billion in depositary shares represents a strategic move to bolster its capital structure. The fixed rate of 6.700% is notable, particularly in the context of the current interest rate environment. Investors will be analyzing the attractiveness of this yield relative to other available fixed-income securities and the overall market conditions. The decision to include diverse underwriters aligns with broader corporate social responsibility trends and may enhance the company's reputation among socially conscious investors.

The terms of the Series I Preferred Stock, including the reset feature tied to the five-year U.S. Treasury rate plus a spread, introduce an element of interest rate risk management. This could be advantageous for State Street in a rising rate environment, as it caps the cost of capital after the reset date. However, investors must consider the potential for lower yields if interest rates decline. The redemption features provide State Street with flexibility, which is a common provision in preferred securities, offering a mechanism to retire the securities under certain conditions, such as a change in regulatory capital treatment.

Market Research Analyst

The involvement of diverse underwriters in State Street's offering is reflective of an increasing emphasis on diversity and inclusion within the financial sector. This could potentially open up the investment to a broader range of investors, particularly those prioritizing diversity in their portfolios. Monitoring the performance of such offerings can yield insights into the market's reception of socially responsible investment practices.

Furthermore, the issuance of preferred stock is a means for State Street to diversify its investor base, as preferred shares often attract different types of investors than common stock. The preferential treatment of dividends and the potential for higher yields can make preferred shares an appealing option for income-focused investors. The impact on State Street's stock price and cost of equity will depend on how the market perceives the company's long-term financial health and its ability to maintain dividend payments on these preferred shares.

Legal Expert

The terms pertaining to the redemption rights of the Series I Preferred Stock and the conditions under which State Street may exercise these rights are of legal significance. Investors should be aware of the implications of a 'regulatory capital treatment event,' which could compel State Street to redeem the shares, impacting investors' expected income streams. Legal provisions embedded in the security's structure provide a safeguard for the issuing company, allowing it to respond to changes in regulatory requirements or capital adequacy guidelines.

Moreover, the non-cumulative nature of the dividends means that if State Street's board of directors does not declare dividends in any given period, investors do not have the right to claim missed payments in the future. This feature reduces the company's dividend liability, which is a critical consideration for risk assessment from a legal perspective. Understanding these provisions is essential for investors to fully grasp their rights and the risk profile of their investment.

BOSTON--(BUSINESS WIRE)-- State Street Corporation (“State Street”) (NYSE: STT) announced today that it has issued $1.5 billion of depositary shares, each representing a 1/100^th ownership interest in a share of its 6.700% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series I (the “Series I Preferred Stock”), without par value per share, with a liquidation preference of $100,000 per share.

The offering, which closed today, was structured in keeping with State Street’s ongoing inclusion, diversity, and equity efforts, with Loop Capital Markets LLC and Samuel A. Ramirez & Company, Inc. each acting as co-managers on the transaction, representing State Street’s eleventh consecutive offering engagement with diverse underwriters. The underwriting syndicate also included BofA Securities, Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC, each acting as joint book-running managers.

Dividends on the Series I Preferred Stock will be payable on the liquidation preference amount, on a non-cumulative basis, quarterly in arrears on the 15^th day of March, June, September and December of each year, commencing on June 15, 2024. Dividends will accrue (i) from the date of issuance to, but excluding, March 15, 2029 at a fixed rate of 6.700% per annum and (ii) from and including March 15, 2029, for each five-year reset period, at a rate per annum equal to the five-year U.S. Treasury rate as of the most recent reset dividend determination date, plus a spread of 2.613%. Dividend payments on the Series I Preferred Stock will only be payable when, as and if declared by State Street’s board of directors, or any duly authorized committee of its board of directors. State Street may redeem the Series I Preferred Stock (i) in whole or in part on any dividend payment date on or after March 15, 2029, subject to regulatory approval, and (ii) in whole but not in part within 90 days following the occurrence of a regulatory capital treatment event.

About State Street Corporation

State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $41.8 trillion in assets under custody and/or administration and $4.1 trillion* in assets under management as of December 31, 2023, State Street operates globally in more than 100 geographic markets and employs approximately 46,000 worldwide. For more information, visit State Street's website at www.statestreet.com.

*Assets under management as of December 31, 2023 includes approximately $64 billion of assets with respect to SPDR® products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240131025972/en/

Investor Contact:

Ilene Fiszel Bieler

+1 617 664 3477

Media Contact:

Ed Patterson

+1 404 213 3106

Source: State Street Corporation

FAQ

What is the ticker symbol for State Street Corporation?

The ticker symbol for State Street Corporation is STT.

What is the dividend payment schedule for the Series I Preferred Stock?

Dividends on the Series I Preferred Stock will be payable quarterly on the 15th day of March, June, September, and December of each year, commencing on June 15, 2024.

How are dividends calculated for the Series I Preferred Stock?

Dividends will accrue at a fixed rate of 6.700% per annum until March 15, 2029, and then reset based on the five-year U.S. Treasury rate plus a spread of 2.613%.

Can State Street redeem the Series I Preferred Stock?

State Street may redeem the Series I Preferred Stock in whole or in part on any dividend payment date on or after March 15, 2029, subject to regulatory approval, and in whole but not in part within 90 days following the occurrence of a regulatory capital treatment event.