8-K: First Busey Corporation Prices $200 Million Depositary Share Offering

First Busey Corporation announces the pricing of its underwritten public offering of 8,000,000 depositary shares, representing a 1/40th ownership interest in its 8.25% Fixed Rate Series B Non-Cumulative Perpetual Preferred Stock.

Summary

• First Busey Corporation (Busey) has priced an underwritten public offering of 8,000,000 depositary shares.
• Each depositary share represents a 1/40th ownership interest in a share of Busey's 8.25% Fixed Rate Series B Non-Cumulative Perpetual Preferred Stock.
• The liquidation preference is $1,000 per share (equivalent to $25.00 per depositary share).
• Dividends will be payable quarterly in arrears at a rate of 8.25% per annum, beginning on September 1, 2025, if declared by the board of directors.
• Busey may redeem the Series B preferred stock at its option at a redemption price equal to $25.00 per depositary share.
• Net proceeds are expected to be used to redeem Busey's 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 and for general corporate purposes.
• Busey intends to list the depositary shares on the Nasdaq Global Select Market under the symbol BUSEP.
• The offering is expected to close on or about May 20, 2025, subject to customary conditions.
• Piper Sandler & Co., Morgan Stanley & Co. LLC, and Keefe, Bruyette & Woods, Inc. are serving as joint bookrunning managers, and Janney Montgomery Scott LLC is acting as the co-manager.

Sentiment

Score: 7

Explanation: The sentiment is neutral to positive. The company is raising capital on reasonable terms, which is generally a positive sign. However, there are inherent risks associated with preferred stock and the company's future performance.

Positives

• The offering provides First Busey Corporation with capital to redeem existing debt and support balance sheet growth.
• The fixed dividend rate of 8.25% may be attractive to income-seeking investors.
• Listing on the Nasdaq Global Select Market could increase the visibility and liquidity of the depositary shares.

Negatives

• Dividends are non-cumulative, meaning that if the board of directors does not declare a dividend in a given quarter, it will not be paid later.
• The preferred stock is perpetual, meaning it has no maturity date and may not be redeemed by the company.
• The company has the option to redeem the Series B preferred stock, which could limit potential upside for investors.

Risks

• The company's performance is subject to various economic and financial market risks, as detailed in the forward-looking statements section.
• The company's ability to pay dividends is subject to the discretion of the board of directors and may be affected by various factors.
• The market price of the depositary shares could fluctuate significantly due to various factors, including changes in interest rates and market conditions.
• The company is currently classified as a Special Act Corporation as a result of an ongoing matter with the Illinois Secretary of State regarding franchise tax filings, and it is possible that the Illinois Secretary of State will classify the Company as Not Good Standing in the future.

Future Outlook

The company intends to use the net proceeds of this offering of Depositary Shares to redeem its 5.25% fixed-to-floating rate subordinated notes due 2030 and for general corporate purposes.

Management Comments

• We are honored to be consistently recognized globally, nationally and locally for our engaged culture of integrity and commitment to community development.

Industry Context

This offering is consistent with other banks raising capital to meet regulatory requirements, redeem higher-cost debt, and support growth.

Comparison to Industry Standards

• The 8.25% dividend rate is within the typical range for preferred stock offerings by regional banks.
• Comparable companies such as Old National Bancorp and Commerce Bancshares have issued similar preferred stock in recent years.
• The use of proceeds to redeem subordinated notes is a common strategy to improve capital ratios and reduce interest expense.

Legal Proceedings

• The Company received an inquiry from the Illinois Secretary of State regarding certain franchise tax filings and the calculation of amounts due thereunder.
• The Company is cooperating with the inquiry and has delivered additional BCA forms requested by the Illinois Secretary of State, with a full reservation of rights by the Company, including seeking judicial relief, if necessary, with respect to any potential dispute regarding the Company's preparation of the BCA forms and the calculation of the franchise taxes due.

Stakeholder Impact

• Shareholders: The offering could dilute existing shareholders' equity.
• Employees: The offering could support the company's growth and stability, which could benefit employees.
• Customers: The offering could enable the company to provide better services and products to customers.
• Creditors: The offering could improve the company's creditworthiness and ability to repay debts.

Next Steps

• The company expects to close the offering on or about May 20, 2025, subject to customary conditions.
• Busey intends to apply to list the depositary shares on the Nasdaq Global Select Market under the symbol BUSEP.

Key Dates

Keywords

depositary shares, preferred stock, public offering, First Busey Corporation, underwriting, dividends, redemption, Nasdaq, BUSEP, banking