Annual Report - CoBank

Preferred StockThe following table summarizes our outstanding preferred stock at December 31, 2011.Preferred Stock as of December 31, 2011Series A Series B Series C Series DType Cumulative Perpetual Cumulative Perpetual Non-Cumulative Non-CumulativePerpetual PerpetualIssue Date June 2001 November 2003 July 2008 August 2009Shares Outstanding (000) 3,265 4,000 4,000 2,735Amount Outstanding (000) $163,250 $200,000 $200,000 $136,750Par Value (per share) $50 $50 $50 $50Dividend Rate (%) 7.814% 7.00% 11.00% 11.00%Change in Dividend Rate (% and dates) Greater of 7.814% or 3-month n/a 3-month USD LIBOR + 6.79% n/aUSD LIBOR + 4.72% on on July 1, 2013July 1, 2016Dividend Frequency Quarterly Quarterly Quarterly QuarterlyOptional Redemption Begins (date) Quarterly calls on or after Quarterly calls on or after Annual calls on or after Quarterly calls on or afterJuly 1, 2011 at par plus January 2, 2009 at par plus July 1, 2013 at par plus October 1, 2014 at par plusaccrued dividends accrued dividends accrued dividends accrued dividendsRank as to Dividends and Upon Liquidation Equal to Series B, C and D Equal to Series A, C and D Equal to Series A, B and D Equal to Series A, B and CIn August 2009, $136.8 million of our Series Acumulative perpetual preferred stock was exchanged forSeries D non-cumulative subordinated perpetual preferredstock, representing 2.735 million shares at $50 per shareoutstanding. Upon completion of this exchange transaction,$163.3 million of Series A preferred stock, representing3.265 million shares at $50 per share, remained outstanding.In connection with this exchange, holders of the Series Apreferred stock voted to eliminate certain restrictions on ourability to make open market purchases or exchanges of theSeries A preferred stock. The exchange of the Series Apreferred stock for new Series D preferred stock resulted in ahigher core surplus ratio, thereby enhancing our capitalposition.In August 2011, we amended the certificates ofdesignation of our Series C and Series D preferred stock torank on parity with Series A and Series B preferred stock as todividend distributions or distributions upon liquidation.As of December 31, 2011, we had $700.0 million ofpreferred stock outstanding. In 2008, our shareholdersapproved a measure allowing CoBank to issue preferred stock,subject to FCA approval, up to the then bylaw limit of$1.0 billion outstanding, at any time through September 2018.This measure allows us to access outside capital more quicklyand efficiently in response to dynamic market conditions,without the necessity of obtaining shareholder approval foreach issuance. In September 2011, in connection with themerger with AgBank, shareholders approved an increase to thelimits of both the preferred stock authorization and the bylawsto $1.5 billion. In conjunction with the merger, on January 1,2012, AgBank’s $225.0 million (par value) of preferred stockwas converted into $225.0 million (par value) of a new seriesof CoBank preferred stock with substantially the same termsand conditions.If preferred stock dividends have not been paid for sixquarters on Series A or Series B preferred stock, or 18 monthson Series C or Series D preferred stock, the preferredstockholders will have the right to appoint two non-votingobservers to attend our Board of Directors meetings until allaccumulated dividends are paid in the case of cumulativepreferred stock, and until full dividends for a one year periodare paid in the case of non-cumulative preferred stock. Inaddition, other than pursuant to an order issued by ourregulator, we may not enter into agreements restricting ourability to declare or pay preferred stock dividends.All stock retirements, including preferred stockredemptions, require the approval of our Board of Directors.Description of EquitiesIn March 2009, our voting shareholders approved changesto our bylaws to convert all previously existing classes ofcommon equity, including non-voting participationcertificates, into a single class of common equity – Class Acommon stock – and to afford voting rights to certainborrowers that are not organized as cooperatives. Class Ashareholders that are directly eligible to borrow from CoBank,that borrow on a patronage basis and that are active borrowershave voting rights. All other shareholders do not have votingrights. The number of voting shareholders increased byapproximately 27 percent as a result of these bylaw changes,which were effective April 1, 2009.CoBank 2011 Annual Report86