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Wells Fargo Files for $13 Billion Mixed Shelf Offering

By Bram Berkowitz – Jun 9, 2020 at 10:32AM

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It's the banking giant's second such securities offering this year.

Wells Fargo (WFC -0.97%) plans to issue a mixed shelf offering of up to $13 billion, according to a Monday regulatory filing with the Securities and Exchange Commission. The proceeds will be used to repay maturing debt obligations, reduce outstanding debt, repurchase outstanding securities, and invest in the company's subsidiaries.

A shelf offering allows a company to issue new securities without having to conduct the entire issuance at once. Wells Fargo will be able to offer the securities gradually over a three-year period without having to re-register them. This allows the company to be more strategic about the timing of when it puts them on the market, theoretically allowing it to get better prices for them.

Wells Fargo

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The shelf filing is considered mixed because it will be composed of different financial instruments including warrants, debt securities, and purchase contracts. These will rank equally with the company's other unsecured unsubordinated debt.

It's the second mixed-shelf offering Wells Fargo has issued in 2020. In January, the financial giant filed for a mixed shelf offering of $66 billion, saying it would use part of the offering to repurchase stock and reduce debt. 

At the end of 2019, Wells Fargo had $139.3 billion in contractual cash obligations that were set to mature in less than one year. Those include deposits, long-term debt, interest, operating leases, unrecognized tax obligations, and commitments to purchase debt and equity securities.

In total, Wells Fargo had more than $1.6 trillion in contractual cash obligations, but much of that isn't due for at least five years, and a lot of it might not be due until much later. 

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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