Business Context and Reporting Period
Company: Merchants Bancorp
Filing Type: Form 8-K (Current Report)
Date of Report: August 19, 2019
Reporting Period: Event-based report regarding the closing of a preferred stock offering on August 19, 2019.
Key Financial Metrics
This filing reports on a capital raise event rather than periodic operating results. Specific operating metrics such as revenue, net income, cash flow, margins, and debt levels are not disclosed in this document.
- Capital Raised: Issuance of 5,000,000 Depositary Shares.
- Underlying Security: 6.00% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock.
- Liquidation Preference: $1,000 per share of Series B Preferred Stock (equivalent to $25.00 per Depositary Share).
- Total Aggregate Liquidation Preference: $125,000,000.
- Underwriters: Morgan Stanley & Co. LLC and UBS Securities LLC.
Material Changes
The primary material change is the expansion of the company's capital structure through the issuance of new preferred stock.
- Articles of Amendment: Filed on August 16, 2019, and effective August 19, 2019, to authorize 125,000 shares of Series B Preferred Stock.
- Dividend Restrictions: The issuance imposes restrictions on the company's ability to declare or pay dividends on, or redeem/purchase, its common stock or junior/parity preferred stock if dividends on the Series B Preferred Stock are not declared for the most recently completed period.
- Existing Preferred Stock: The filing notes the existence of 8% Non-Cumulative Perpetual Preferred Stock and 7.00% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock, which are subject to the new restrictions.
Guidance, Outlook, and Risks
Management Commentary: The filing confirms the successful closing of the offering and the effectiveness of the Articles of Amendment. No forward-looking guidance regarding earnings or growth is provided in this text.
Risks and Contingencies:
- Dividend Obligation: The company faces a potential constraint on capital flexibility (dividends on common/junior stock) if it fails to pay dividends on the new Series B Preferred Stock.
- Non-Cumulative Nature: The Series B Preferred Stock is non-cumulative, meaning missed dividends do not accumulate for future payment, though the restriction on other dividends remains if a dividend is not declared for the period.
Investor Verification Checklist
- Verify the final proceeds received from the $125,000,000 offering in the company's most recent 10-Q or 10-K.
- Review the full text of the Articles of Amendment (Exhibit 3.3) to understand specific voting rights and redemption terms.
- Confirm the impact of the new dividend restrictions on the company's ability to pay common stock dividends in future quarters.
- Check the company's current liquidity position to ensure it can meet the 6.00% dividend obligation on the new Series B stock.