Item 3.03
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Material Modification to Rights of Security Holders.
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On June 11, 2020, Sempra Energy (the “Company”) filed a Certificate of Determination (the “Certificate of Determination”) with the Secretary of State of the State of California to establish the designations, privileges, preferences, rights and restrictions of its 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”). The Certificate of Determination became effective on the date of its filing, and a copy is filed as an exhibit to this report and is incorporated herein by reference. The description of certain terms of the Series C Preferred Stock set forth in this Item 3.03 is qualified in its entirety by reference to such exhibit.
Pursuant to the Certificate of Determination, so long as any share of Series C Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Company’s common stock or any other class or series of its capital stock established after the original issue date of the Series C Preferred Stock the terms of which do not expressly provide that such class or series will rank senior to or on parity with the Series C Preferred Stock as to dividend rights and distribution rights upon the Company’s liquidation, winding-up or dissolution (collectively, “junior stock”), and no common stock or any other junior stock shall be purchased, redeemed or otherwise acquired for consideration by the Company or any of its subsidiaries unless, in each case, all accumulated and unpaid dividends for all preceding dividend periods have been declared and paid, or a sufficient sum of cash has been set aside for the payment of such dividends, on all outstanding shares of Series C Preferred Stock, subject, in each case, to certain exceptions. Additionally, when dividends on shares of the Series C Preferred Stock have not been declared and paid in full on any dividend payment date for the Series C Preferred Stock or have been declared but a sum of cash sufficient for payment thereof has not been set aside for the benefit of the holders thereof on the applicable record date, no dividends may be declared or paid on the Company’s outstanding 6% Mandatory Convertible Preferred Stock, Series A or 6.75% Mandatory Convertible Preferred Stock, Series B or any other class or series of the Company’s capital stock established after the original issue date of the Series C Preferred Stock the terms of which expressly provide that such class or series will rank on parity with the Series C Preferred Stock as to dividend rights and distribution rights upon the Company’s liquidation, winding-up or dissolution (collectively, “parity stock”), unless dividends are declared on the shares of Series C Preferred Stock such that the respective amounts of such dividends declared on the shares of Series C Preferred Stock and such parity stock shall bear the same ratio to each other as all accumulated dividends and all declared and unpaid dividends per share on the shares of Series C Preferred Stock and such parity stock bear to each other.
In addition, whenever dividends on any shares of the Series C Preferred Stock have not been declared and paid or have been declared but a sum of cash sufficient for payment thereof has not been set aside for the benefit of the holders of Series C Preferred Stock on the applicable record date, for the equivalent of three or more dividend periods (as defined below), whether or not for consecutive dividend periods, the authorized number of directors on the Company’s board of directors will automatically be increased by two and the holders of the Series C Preferred Stock, voting together as a single class with holders of any and all other series of voting preferred stock (as defined below) then outstanding, will be entitled, at the Company’s next annual meeting, or at a special meeting (if any), of shareholders to elect two directors to fill such two newly created directorships. If and when all accumulated and unpaid dividends on the Series C Preferred Stock have been paid in full, the holders of the Series C Preferred Stock shall immediately be divested of the foregoing voting rights, and upon the divesting of such voting rights and the same voting rights of all other holders of voting preferred stock, the term of office of each director elected pursuant to such rights will terminate and the authorized number of directors shall automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment of dividends as described above. A “dividend period” is the period from, and including, a dividend payment date for the Series C Preferred Stock to, but excluding, the next such dividend payment date, except that the initial dividend period will commence on, and include, the original issue date of the Series C Preferred Stock. “Voting preferred stock” means any series of preferred stock of the Company, other than the Series C Preferred Stock, ranking equally with the Series C Preferred Stock either as to dividends or to the distribution of assets upon the Company’s liquidation, winding-up or dissolution and upon which like voting rights have been conferred and are exercisable (which includes the Company’s 6% Mandatory Convertible Preferred Stock, Series A and 6.75% Mandatory Convertible Preferred Stock, Series B).
Additionally, in the event of the Company’s voluntary or involuntary liquidation, winding-up or dissolution, each holder of the Series C Preferred Stock will be entitled to receive a liquidation preference in the amount of $1,000 per share of the Series C Preferred Stock, plus an amount equal to accumulated and unpaid dividends (whether or not declared) on such shares to, but excluding, the date fixed for liquidation, winding-up or dissolution to be paid out of the Company’s assets legally available for distribution to its stockholders, after satisfaction of debt and other liabilities owed to the Company’s creditors and holders of shares of any class or series of the Company’s capital stock established after the original issue date of the Series C Preferred Stock the terms of which expressly provide that such class or series will rank senior to the Series C Preferred Stock as to dividend rights and distribution rights upon the Company’s liquidation, winding-up or dissolution, and before any payment or distribution is made to holders of junior stock (including the Company’s common stock). If, upon the Company’s voluntary or involuntary liquidation, winding-up or dissolution, the foregoing amounts payable in respect of the Series C Preferred Stock
and the liquidation preference of, and the amount of accumulated and unpaid dividends (to, but excluding, the date fixed for such liquidation, winding-up or dissolution) on, all other parity stock are not paid in full, the holders of the Series C Preferred Stock and all holders of any such other parity stock will share equally and ratably in any distribution of the Company’s assets in proportion to their respective liquidation preferences and amounts equal to accumulated and unpaid dividends to which they are entitled.
The terms of the Series C Preferred Stock, including such restrictions, are more fully described in the Certificate of Determination and below under Item 5.03.
Item 5.03
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Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
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To the extent required by Item 5.03 of Form 8-K, the information regarding the Certificate of Determination contained in Item 3.03 of this report is incorporated in this Item 5.03 by reference. A copy of the Certificate of Determination is filed as an exhibit to this report and is incorporated herein by reference. The description of certain terms of the Series C Preferred Stock set forth in this Item 5.03 is qualified in its entirety by reference to such exhibit.
Holders of the Series C Preferred Stock will be entitled to receive, when, as and if declared by the Company’s board of directors, or an authorized committee thereof, out of funds legally available for payment, cumulative cash dividends at the rate per annum described below on the liquidation preference of $1,000 per share, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2020, and dividends will accumulate daily whether or not the Company has funds legally available for the payment of such dividends. The dividend rate on the Series C Preferred Stock from and including its original issue date to, but excluding, October 15, 2025 (the “First Reset Date”) will be 4.875% per annum of the $1,000 liquidation preference per share. The dividend rate on the Series C Preferred Stock will reset on the First Reset Date and on October 15 of every fifth year after 2025 (each such date, including the First Reset Date, a “Reset Date”) and, for each five-year period from and including a Reset Date to but excluding the next following Reset Date, will be a per annum rate equal to the Five-year U.S. Treasury Rate (as defined in the Certificate of Determination) as of the second business day (as defined in the Certificate of Determination) prior to the first day of such period, plus a spread of 4.550%, of the $1,000 liquidation preference per share.
The Series C Preferred Stock is perpetual and has no maturity date, but is redeemable at the Company’s option, (i) in whole or in part, from time to time, on any day during the three month period from and including July 15, 2025 through and including the First Reset Date and during the three month period from and including July 15 through and including October 15 of every fifth year after 2025, at a redemption price in cash equal to $1,000 per share; or (ii) in whole but not in part, at any time within 120 days after the conclusion of any review or appeal process instituted by the Company following the occurrence of a Ratings Event (as defined in the Certificate of Determination), or, if no review or appeal process is available or sought with respect to such Ratings Event, at any time within 120 days after the occurrence of such Ratings Event, at a redemption price in cash equal to $1,020 per share (i.e., 102% of the liquidation preference of $1,000 per share); plus, in each case, but subject to certain exceptions, all accumulated and unpaid dividends (whether or not declared) to, but excluding, such redemption date.
Except as required by California law or as described in Item 3.03 of this report or the Certificate of Determination, the Series C Preferred Stock will not have voting rights.
On June 10, 2020, the Company priced a registered public offering of 900,000 shares of its Series C Preferred Stock at a price to the public of $1,000 per share. The Company estimates that the net proceeds from the offering, after deducting the underwriting discount but before deducting estimated offering expenses payable by the Company, will be $891 million. In connection with the offering, the Company entered into an underwriting agreement dated June 10, 2020 with Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, as the representatives of the several underwriters named on Schedule I thereto (the “Underwriters”), pursuant to which the Company agreed to issue and sell to the Underwriters, severally and not jointly, such shares of Series C Preferred Stock for resale in such offering under a prospectus supplement and related prospectus filed with the U.S. Securities and Exchange Commission pursuant to the Company’s effective shelf registration statement on Form S-3, as amended by post-effective Amendment No. 1 thereto (File No. 333-220257). Copies of the underwriting agreement and the Certificate of Determination establishing the terms of the Series C Preferred Stock (which includes the form of certificate evidencing the shares of the Series C Preferred Stock) are filed as exhibits to this report and are incorporated herein by reference. The description of certain terms of the Series C Preferred Stock and the Underwriting Agreement set forth above is qualified in its entirety by reference to such exhibits.
The Company expects to close the issuance and sale of its Series C Preferred Stock as described above on or about June 19, 2020.