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The
information in this prospectus is not complete and may be
changed. This preliminary prospectus is not an offer to sell nor
does it seek an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
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Per Trust
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| Preferred Security | Total | |||||||
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Initial public offering price(1)
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% | $ | ||||||
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Underwriting discount(2)
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% | $ | ||||||
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Proceeds, before expenses, to
Huntington
|
% | $ | ||||||
| (1) | Plus accrued distributions, if any, on the Trust Preferred Securities from May , 2007 to the date of delivery. | |
| (2) | In view of the fact that the proceeds of the sale of the Trust Preferred Securities will be invested in the JSNs, Huntington has agreed to pay the underwriters, as compensation for arranging the investment therein of such proceeds, $ per Trust Preferred Security (or $ in the aggregate). See Underwriting. |
| Goldman, Sachs & Co. | Morgan Stanley |
| (Lead Structuring Coordinator) | (Structuring Coordinator) |
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Page
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PROSPECTUS
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ABOUT THIS PROSPECTUS
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1 | |||
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WHERE YOU CAN FIND MORE INFORMATION
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3 | |||
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FORWARD-LOOKING STATEMENT
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4 | |||
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HUNTINGTON BANCSHARES INCORPORATED
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4 | |||
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USE OF PROCEEDS
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5 | |||
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RATIOS OF EARNINGS OF FIXED CHARGES
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5 | |||
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CERTAIN ERISA CONSIDERATIONS
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5 | |||
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PLAN OF DISTRIBUTION
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6 | |||
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LEGAL MATTERS
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7 | |||
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EXPERTS
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7 | |||
S-i
| | competitive pressures on product pricing and services and financial institutions generally; | |
| | changes in the interest rate environment may reduce interest margins; | |
| | prepayment rates, loan originations and sale volumes, charge-offs and loan loss provisions are inherently uncertain; | |
| | general economic conditions, either nationally or in the states in which we do business, may be less favorable than expected; | |
| | political developments, wars or other hostilities may disrupt or increase volatility in securities markets or otherwise affect economic conditions; | |
| | changes and trends in the capital markets; | |
| | the nature, extent and timing of legislative or regulatory changes or actions, or significant litigation, may adversely affect the businesses in which we are engaged; | |
| | our ability to maintain favorable ratings from rating agencies; | |
| | effects of critical accounting policies and judgments; | |
| | changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; | |
| | fluctuation of our stock price; | |
| | ability to attract and retain our key personnel; | |
| | ability to receive dividends from our subsidiaries; | |
| | potential dilutive effect of future acquisitions on current shareholders ownership of Huntington; | |
| | the businesses of Huntington and that of any pending or approved acquisition may not be integrated successfully or such integration may take longer to accomplish than expected; | |
| | the expected cost savings and any revenue synergies from acquisitions may not be fully realized within the expected timeframes; |
S-ii
| | disruption from acquisitions may make it more difficult to maintain relationships with clients, associates, or suppliers; | |
| | the required governmental approvals of acquisitions may not be obtained on the proposed terms and schedule; | |
| | if required by an acquisition, Huntington and/or the stockholders of any pending or approved acquisition may not approve the acquisition; | |
| | success and timing of other business strategies; | |
| | extended disruption of vital infrastructure; | |
| | ability to secure confidential information through the use of computer systems and telecommunications network; and | |
| | the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity. |
S-iii
| | issuing the Trust Preferred Securities and common securities representing undivided beneficial interests in the Trust; |
S-1
| | investing the gross proceeds of the Trust Preferred Securities and the common securities in the JSNs; and | |
| | engaging in only those activities convenient, necessary or incidental thereto. |
| Issuer | Huntington Capital III | |
| Securities Offered | $ % Trust Preferred Securities, each Trust Preferred Security representing an undivided beneficial interest in Huntington Capital III. | |
| Liquidation Amount | $1,000 | |
| Distributions | If you purchase Trust Preferred Securities, you will be entitled to receive periodic distributions on the stated liquidation amount of $1,000 per Trust Preferred Security (the liquidation amount) on the same payment dates and in the same amounts as Huntington pays interest to the Trust on a principal amount of JSNs equal to the liquidation amount of such Trust Preferred Security. Distributions will accumulate from May , 2007. The Trust will make distribution payments on the Trust Preferred Securities: |
| | semi-annually in arrears on each May and November , beginning on November , 2007 until May , 2017; | |
| | quarterly in arrears on each February , May , August and November , beginning on August , 2017 until May , 2047 (or if such day is not a business day, on the next business day); and | |
| | thereafter monthly in arrears on the first day of each month (or if such day is not a business day, on the next business day). |
S-2
| In the event any distribution date on or prior to the regularly scheduled distribution date in May 2017 is not a business day, payment on the following business day shall be made without adjustment. If Huntington defers payment of interest on the JSNs, distributions by the Trust on the Trust Preferred Securities will also be deferred. | ||
| Deferral of Distributions | Huntington has the right, on one or more occasions, to defer the payment of interest on the JSNs for one or more consecutive interest periods not exceeding five years without being subject to its obligations described under Description of the Junior Subordinated Notes Alternative Payment Mechanism, and for one or more consecutive interest periods not exceeding 10 years without giving rise to an event of default under the terms of the JSNs or the Trust Preferred Securities. However, no interest deferral may extend beyond the redemption of the JSNs or the final repayment date. Interest on the JSNs will continue to accrue during deferral periods and, as a result, distributions on the Trust Preferred Securities will continue to accumulate at the interest rate on the JSNs, compounded on each distribution date. | |
| If Huntington exercises its right to defer interest payments on the JSNs, the Trust will also defer paying a corresponding amount of distributions on the Trust Preferred Securities during that deferral period. | ||
| During any deferral period, neither Huntington nor the Trust will generally be permitted to make any payments of deferred interest or distributions from any source other than eligible proceeds, as defined under Description of the Junior Subordinated Notes Alternative Payment Mechanism, or required to make any interest or distribution payments other than pursuant to the alternative payment mechanism. | ||
| Following the earlier of (i) the fifth anniversary of the commencement of a deferral period or (ii) a payment of current interest on the JSNs, Huntington will be required, with certain exceptions, to pay deferred interest pursuant to the alternative payment mechanism described under Description of the Junior Subordinated Notes Alternative Payment Mechanism. At any time during a deferral period, Huntington may not pay deferred interest on the JSNs except pursuant to the alternative payment mechanism, subject to limited exceptions. However, it may pay current interest on any interest payment date out of any source of funds free of the limitations of the alternative payment mechanism, even if that interest payment date is during a deferral period. | ||
| If Huntington defers payments of interest on the JSNs, the JSNs will be treated as being issued with original issue discount for U.S. federal income tax purposes. This means that you must include interest income with respect to the deferred distributions on your Trust Preferred Securities in gross income for U.S. federal income tax purposes, prior to |
S-3
| receiving any cash distributions. See Certain United States Federal Income Tax Consequences U.S. Holders Interest Income and Original Issue Discount. | ||
| Redemption of Trust Preferred Securities | The Trust will use the proceeds of any repayment or redemption of the JSNs to redeem, on a proportionate basis, an equal amount of Trust Preferred Securities and common securities. | |
| For a description of Huntingtons rights to redeem the JSNs, see Description of the Junior Subordinated Notes Redemption. | ||
| Under the current rules of the Board of Governors of the Federal Reserve System (referred to collectively with the Federal Reserve Bank of Cleveland, or any successor federal bank regulatory agency having primary jurisdiction over Huntington, as the Federal Reserve), Federal Reserve approval is generally required for the early redemption of preferred stock or trust preferred securities included in regulatory capital. However, under current guidelines, rules and regulations, Federal Reserve approval is not required for the redemption of the Trust Preferred Securities on or after the scheduled maturity date in connection with the repayment of the JSNs since, in this case, the redemption would not be an early redemption but would be pursuant to Huntingtons contractual obligation to repay the JSNs, subject to the limitations described under Description of the Junior Subordinated Notes Repayment of Principal, on the scheduled maturity date. | ||
| Liquidation of the Trust and Distribution of JSNs to Holders | Huntington may elect to dissolve the Trust at any time and, after satisfaction of the Trusts liabilities, to cause the property trustee to distribute the JSNs to the holders of the Trust Preferred Securities and common securities. However, if then required under the risk-based capital guidelines or policies of the Federal Reserve applicable to bank holding companies, it must obtain the approval of the Federal Reserve prior to making that election. | |
| Further Issues | The Trust has the right to issue additional Trust Preferred Securities of this series in the future, subject to the conditions described under Description of the Trust Preferred Securities Further Issues. Any such additional Trust Preferred Securities will have the same terms as the Trust Preferred Securities being offered by this prospectus supplement but may be offered at a different offering price and accrue distributions from a different date than the Trust Preferred Securities being offered hereby. If issued, any such additional Trust Preferred Securities will become part of the same series as the Trust Preferred Securities being offered hereby to the extent such securities bear the same CUSIP number unless such additional securities would not be treated as fungible with the previously issued and outstanding Trust Preferred Securities for U.S. federal income tax purposes. |
S-4
| Guarantee | Huntington will fully and unconditionally guarantee payment of amounts due under the Trust Preferred Securities on a subordinated basis and only to the extent the Trust has funds available for payment of those amounts. We refer to this obligation as the guarantee . The guarantee does not cover payments if the Trust does not have sufficient funds to make the distribution payments, including, for example, if Huntington has failed to pay to the Trust amounts due under the JSNs or if it elects to defer payment of interest under the JSNs. | |
| As issuer of the JSNs, Huntington is also obligated to pay the expenses and other obligations of the Trust, other than its obligations to make payments on the Trust Preferred Securities. | ||
| Book-Entry | The Trust Preferred Securities will be represented by one or more global securities registered in the name of and deposited with The Depository Trust Company ( DTC ) or its nominee. This means that you will not receive a certificate for your Trust Preferred Securities and Trust Preferred Securities will not be registered in your name, except under certain limited circumstances described in Book-Entry System. | |
| No Listing | Huntington does not intend to apply to list the Trust Preferred Securities on the New York Stock Exchange or any other securities exchange. |
S-5
| (1) | Huntington may extend the Scheduled Maturity Date only upon satisfaction of certain criteria. See Description of the Junior Subordinated Notes Repayment of Principal. | |
| (2) | Latest date by which Huntington is required to repay any unpaid portion of the JSNs. See Description of the Junior Subordinated Notes Repayment of Principal. | |
| (3) | The JSNs are callable by Huntington in whole or in part on the discrete call dates in 2017 and 2027 and at any time after May , 2037 without the payment of a make-whole premium. In addition, the JSNs are callable by Huntington in whole but not in part without the payment of a make-whole premium under certain circumstances. See Description of the Junior Subordinated Notes Redemption. |
| Repayment of Principal | Huntington must repay the principal amount of the JSNs, together with accrued and unpaid interest, on the scheduled maturity date, subject to the limitations described below. The scheduled maturity date is initially May , 2037, or if that date is not a business day, the next business day, but may be extended at Huntingtons option to May , 2047 upon the satisfaction of certain criteria, as described under Description of the Junior Subordinated Notes Repayment of Principal. | |
| Huntington is required to repay the JSNs on the scheduled maturity date to the extent of the net proceeds that it has raised from the issuance of qualifying capital securities , as described under Replacement Capital Covenant, during a 180-day period ending on a notice date not more than 30 or less than 10 business days prior to such date. If it has not raised sufficient net proceeds to permit repayment of all principal and accrued and unpaid interest on the JSNs on the scheduled maturity date, it will repay the JSNs to the extent of the net proceeds it has raised and the unpaid portion will |
S-6
| remain outstanding. Huntington will be required to repay the unpaid portion of the JSNs on each subsequent interest payment date to the extent of the net proceeds it receives from any subsequent issuance of qualifying capital securities or upon the earliest to occur of: |
| | the redemption of the JSNs; | |
| | an event of default that results in acceleration of the JSNs; and | |
| | May , 2067, which is the final repayment date . |
| Huntington will use its commercially reasonable efforts, subject to a market disruption event , as described under Description of the Junior Subordinated Notes Market Disruption Events, to raise sufficient net proceeds from the issuance of qualifying capital securities in a 180-day period ending on a notice date not more than 30 or less than 10 business days prior to the scheduled maturity date to permit repayment of the JSNs in full on the scheduled maturity date in accordance with the preceding paragraph. If Huntington is unable for any reason to raise sufficient proceeds, it will use its commercially reasonable efforts, subject to a market disruption event, to raise sufficient proceeds from the sale of qualifying capital securities to permit repayment of the JSNs on the following interest payment date, and on each interest payment date thereafter, until the JSNs are paid in full. | ||
| Any unpaid principal amount of the JSNs, together with accrued and unpaid interest, will be due and payable on the final repayment date, regardless of the amount of qualifying capital securities Huntington has issued and sold by that time. | ||
| Huntington is not required to issue any securities pursuant to the obligation described above other than qualifying capital securities. | ||
| Under the current risk-based capital adequacy guidelines of the Federal Reserve, Federal Reserve approval is generally required for the early redemption of preferred stock or trust preferred securities included in regulatory capital. However, under current guidelines, rules and regulations, Federal Reserve approval is not required for the redemption of the Trust Preferred Securities on or after the scheduled maturity date in connection with the repayment of the JSNs as described above since, in this case, the redemption would not be an early redemption but would be pursuant to our contractual obligation to repay the JSNs. | ||
| Interest | The JSNs will bear interest: |
| | at the annual rate of % from and including May , 2007 to but excluding May , 2017, payable semi-annually in arrears on May and November of each year, beginning on November , 2007 until May , 2017; |
S-7
| | at an annual rate equal to three-month LIBOR plus % from and including May , 2017 to but excluding May , 2047, payable quarterly in arrears on February , May , August and November of each year, beginning on August , 2017 until May , 2047 (or if any such day is not a business day, on the next business day); and | |
| | thereafter at an annual rate equal to one-month LIBOR plus %, payable monthly in arrears on the first day of each month (or if any such day is not a business day, on the next business day). |
| In the event any interest payment date on or prior to the regularly scheduled interest payment date in May 2017 is not a business day, the interest payment made on the following business day shall be made without adjustment. | ||
| Subordination | The JSNs will be unsecured and will be deeply subordinated upon Huntingtons liquidation, including to all of its existing and future senior debt, and will be effectively subordinated to all liabilities of its subsidiaries. Substantially all of Huntingtons existing indebtedness is senior debt. At March 31, 2007, Huntingtons indebtedness for money borrowed ranking senior to the JSNs upon liquidation, on a consolidated basis, was $31.9 billion and its subsidiaries direct borrowings and deposit liabilities that would effectively rank senior to the JSNs was $31.4 billion. See Description of the Junior Subordinated Notes Subordination for the definition of senior debt . | |
| Certain Payment Restrictions Applicable to Huntington | During any deferral period or period in which Huntington has given notice of its election to defer interest payments on the JSNs but the related deferral period has not yet commenced, Huntington generally may not make payments on or redeem or repurchase its capital stock or its debt securities or guarantees ranking pari passu with or junior to the JSNs, subject to the exceptions described under Description of the Junior Subordinated Notes Dividend and Other Payment Stoppages during Interest Deferral and under Certain Other Circumstances. In addition, if any deferral period lasts longer than one year, Huntington generally may not be permitted to repurchase or acquire any of its securities ranking junior to or pari passu with any qualifying APM securities the proceeds of which were used to settle deferred interest during the relevant deferral period until the first anniversary of the date on which all deferred interest has been paid. | |
| The terms of the JSNs permit Huntington to make any payment of current or deferred interest on its debt securities or guarantees that rank on a parity with the JSNs upon its liquidation ( parity securities ) so long as the payment is made pro rata to the amounts due on parity securities (including the JSNs), subject to the limitations described in the last paragraph under Description of the Junior Subordinated Notes Alternative Payment Mechanism to the extent that they apply, |
S-8
| and any payment of deferred interest on parity securities that, if not made, would cause it to breach the terms of the instrument governing such parity securities. | ||
| Redemption of JSNs | Huntington may redeem the JSNs at any time. The redemption price will be 100% of the principal amount to be redeemed, plus accrued and unpaid interest through the date of redemption, in the case of any redemption: |
| | in whole or in part on May , 2017 or May , 2027; | |
| | in whole but not in part at any time within 90 days of the occurrence of certain changes relating to the capital treatment of, or investment company laws relating to, the Trust Preferred Securities; | |
| | in whole but not in part at any time after May , 2017 and within 90 days of the occurrence of certain changes relating to the tax treatment of the Trust Preferred Securities; or | |
| | in whole or in part at any time on or after May 2037 (including on or after the scheduled maturity date). |
| In all other cases, the redemption price will be a make-whole redemption price. The make-whole redemption price may be lower in the case of a redemption of all outstanding JSNs prior to May , 2017 within 90 days of the occurrence of certain changes relating to the tax treatment of, or the rating agency equity credit accorded to, the Trust Preferred Securities. See Description of the Junior Subordinated Notes Redemption. | ||
| Huntington will be subject to its obligations under the replacement capital covenant (as described below) if it elects to redeem any or all of the JSNs prior to the termination of the replacement capital covenant. In addition, under the current risk-based capital adequacy guidelines of the Federal Reserve applicable to bank holding companies, Federal Reserve approval is generally required for the early redemption of preferred stock or trust preferred securities included in regulatory capital. | ||
| Events of Default | The following events are events of default with respect to the JSNs: |
| | default in the payment of interest, including compounded interest, in full on any JSNs for a period of 30 days after the conclusion of a 10-year period following the commencement of any deferral period; | |
| | bankruptcy of Huntington; or | |
| | receivership of a major subsidiary depository institution of Huntington within the meaning of the Federal Reserves risk-based capital guidelines applicable to bank holding companies. As of the date of this prospectus supplement, |
S-9
| The Huntington National Bank is Huntingtons only major subsidiary depository institution. |
| If an event of default under the indenture occurs and continues, the indenture trustee or the holders of at least 25% in aggregate principal amount of the outstanding JSNs may declare the entire principal and all accrued but unpaid interest of all JSNs to be due and payable immediately. If the indenture trustee or the holders of JSNs do not make such declaration and the JSNs are beneficially owned by the Trust or a trustee of the Trust, the property trustee or the holders of at least 25% in aggregate liquidation amount of the Trust Preferred Securities shall have such right. The property trustee may annul the declaration and waive the default, provided all defaults have been cured and all payment obligations have been made current. Should the property trustee fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the Trust Preferred Securities have the right to do so. | ||
| Tax Treatment | In connection with the issuance of the JSNs, Shearman & Sterling LLP, Huntingtons special tax counsel, has advised us that, under current law and assuming full compliance with the terms of the indenture and other relevant documents, and based on the representations, facts and assumptions set forth in its opinion, although the matter is not free from doubt, the JSNs will be characterized as indebtedness for U.S. federal income tax purposes. The Trust Preferred Securities are novel financial instruments, and there is no statutory, judicial or administrative authority that directly addresses the U.S. federal income tax treatment of securities similar to the Trust Preferred Securities. Thus, no assurance can be given that the Internal Revenue Service or a court will agree with this characterization. By purchasing the Trust Preferred Securities, each holder of the Trust Preferred Securities agrees, and Huntington and the Trust agree, to treat the JSNs as indebtedness for all U.S. federal income tax purposes. See Certain United States Federal Income Tax Consequences. |
| | in the case of a redemption or purchase prior to the scheduled maturity date, Huntington has obtained the prior approval of the Federal Reserve if such approval is then required under the Federal Reserves capital guidelines or policies applicable to bank holding companies; and |
S-10
| | the principal amount repaid or the applicable redemption or purchase price does not exceed a maximum amount determined by reference to: |
| | the applicable percentage of the aggregate amount of (i) net cash proceeds Huntington and its subsidiaries have received from the sale of common stock or rights to acquire common stock (including common stock or rights to acquire common stock issued pursuant to Huntingtons dividend reinvestment plan or employee benefit plans), (ii) the market value of any common stock that Huntington or any of its subsidiaries have delivered as consideration for property or assets in an arms-length transaction and (iii) the market value of any common stock that Huntington or any of its subsidiaries issued in connection with the conversion or exchange of any convertible or exchangeable securities, other than securities for which Huntington or any of its subsidiaries has received equity credit from any rating agency, plus | |
| | 100% of the aggregate amount of net cash proceeds Huntington and its subsidiaries have received from the sale of debt exchangeable for common equity, debt exchangeable for preferred equity, mandatorily convertible preferred stock or REIT preferred securities, plus | |
| | 100% of the aggregate amount of net cash proceeds Huntington and its subsidiaries have received from the sale of qualifying capital securities, |
S-11
S-12
| Three Months Ended March 31, | Year Ended December 31, | |||||||||||||||||||||||||||
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2007
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2006
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2006
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2005
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2004
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2003
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2002
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Statements of Income:
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Interest income
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$ | 534,949 | $ | 464,787 | $ | 2,070,519 | $ | 1,641,765 | $ | 1,347,315 | $ | 1,305,756 | $ | 1,293,195 | ||||||||||||||
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Interest expense
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279,394 | 221,107 | 1,051,342 | 679,354 | 435,941 | 456,770 | 543,621 | |||||||||||||||||||||