BNY Sets Pricing for $500 Million Public Offering of Depositary Shares Linked to Preferred Stock
The Bank of New York Mellon Corporation (“BNY Mellon” or “BNY”) (NYSE: BK), a leading global financial services institution, has officially announced the pricing of its underwritten public offering involving 20,000,000 depositary shares. Each of these depositary shares represents a 1/4,000th interest in a share of its newly issued Series K Noncumulative Perpetual Preferred Stock. The shares carry a liquidation preference of $100,000 per share, which translates to an equivalent value of $25 per depositary share. The public offering has been priced at $25 per depositary share, leading to an aggregate public offering value of $500,000,000.
Dividend Structure and Accrual Details
The dividends on the liquidation amount of $100,000 per share of the Series K preferred stock will accrue at a fixed annual rate of 6.150% from the original issue date until March 20, 2030. From that point onward, the dividend rate will be adjusted based on the “five-year treasury rate” as defined in the preliminary prospectus supplement, plus an additional spread of 2.161%. The calculation Pricing of this rate ensures that the dividend yield remains responsive to prevailing market conditions while maintaining a reasonable spread over the risk-free rate.
Crucially, dividends will be disbursed only if, as, and when declared by the board of directors of BNY Mellon or a duly authorized committee of the board. Furthermore, dividends can only be paid to the extent that BNY Mellon possesses legally available funds for such distributions. This mechanism ensures prudent financial management and aligns with regulatory guidelines regarding preferred stock distributions.
Redemption Provisions and Key Dates
The Series K preferred stock incorporates a redemption feature that provides BNY Mellon with the option to redeem these shares in whole or in part, beginning on March 20, 2030, or on any subsequent dividend payment date. The redemption will be executed at a cash price equal to $100,000 per share, which translates to $25 per depositary share. In addition to the redemption price, any declared but unpaid dividends will be included in the payout. However, no additional dividends will be accumulated for the period leading up to the redemption date if they remain undeclared.
Underwriting and Key Participants
The underwriting for this offering has been led by a group of esteemed financial institutions. The joint book-running managers involved in the transaction include:
- Morgan Stanley & Co. LLC
- UBS Investment Bank
- Deutsche Bank Securities Inc.
- Goldman Sachs & Co. LLC
- RBC Capital Markets, LLC
- BNY Mellon Capital Markets, LLC
These investment banks have played a critical role in structuring and facilitating the offering, ensuring that it reaches a broad base of institutional and retail investors. The offering is projected to close on March 14, 2025, subject to customary closing conditions and regulatory approvals.
Intended Use of Proceeds
BNY Mellon plans to utilize the net proceeds generated from the sale of the depositary shares for general corporate purposes. As outlined in the preliminary prospectus supplement, these purposes may include, but are not limited to, enhancing liquidity, funding operational expenses, supporting business expansion initiatives, and potentially reducing existing financial obligations. The precise allocation of proceeds will be determined based on the company’s evolving strategic priorities and prevailing market conditions.
Regulatory Filings and Compliance
As part of the offering process, BNY Mellon has adhered to standard regulatory disclosure requirements. The company initially filed a shelf registration statement, including a prospectus, on October 18, 2024. This registration statement was later amended on December 5, 2024, to incorporate updated financial and legal information. Additionally, Pricing a preliminary prospectus supplement Pricing was filed on March 7, 2025, to provide prospective investors with essential details regarding the offering. Following the pricing of the securities, BNY Mellon will submit a final prospectus supplement to the U.S. Securities and Exchange Commission (SEC), in compliance with regulatory requirements.
Investors interested in participating in the offering are encouraged to review the complete set of documents filed with the SEC. These include the registration statement (along with the base prospectus), the preliminary prospectus supplement, and the final prospectus supplement Pricing once available. These documents contain crucial details about BNY Mellon, the offering structure, associated risks, and legal considerations.
Legal Disclaimers and Offering Conditions
It is important to note that this press release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein. Additionally, the securities will not be offered or sold in any jurisdiction where such transactions would be considered unlawful. The offering is being conducted strictly in accordance with the terms outlined in the prospectus supplement and the accompanying base prospectus.
Market Implications and Investor Considerations
The issuance of preferred stock, such as BNY Mellon’s Series K Noncumulative Perpetual Preferred Stock, provides the company with an alternative means of raising capital without immediately diluting common shareholders’ equity. Given the fixed dividend structure for the initial Pricing period, these securities may appeal to income-focused investors seeking a steady return. However, investors should also be mindful of the interest rate reset mechanism post-2030, which introduces an element of variability based on prevailing market conditions.
Additionally, noncumulative preferred stock means that if dividends are not declared in a given period, they do not accrue for future payment. This feature differs Pricing from cumulative preferred stock, where missed dividends accumulate and must be paid before any Pricing common stock dividends. Therefore, potential investors should assess their risk tolerance and investment objectives before participating in the offering.
Strategic Rationale for BNY Mellon
BNY Mellon’s decision to issue preferred stock aligns with its broader financial strategy of optimizing its capital structure while maintaining robust Pricing liquidity. By issuing preferred shares, the company secures long-term funding without increasing its debt burden. This move also enhances the company’s Tier 1 capital ratio, which is a key metric used by regulators and analysts to assess financial stability.
Moreover, the timing of this offering suggests that BNY Mellon is leveraging favorable market conditions to secure capital at competitive rates. The initial 6.150% dividend rate reflects current market conditions and investor demand for fixed-income instruments offering higher yields amid macroeconomic uncertainties.
