Cleary Gottlieb represented American Express Company in a $750 million offering of its 6.8% subordinated debentures. The joint-bookrunners and joint-structuring coordinators for the offering were Citigroup Global Markets Inc. and Goldman, Sachs & Co.
The subordinated debentures are “hybrid” securities that combine features of traditional debt -- such as a fixed maturity date and regular interest payments -- and traditional equity -- such as the right to defer current payments without causing an event of default, and subordination in bankruptcy to the claims of holders of senior and other subordinated debt. Under the terms of the debentures, American Express is permitted to defer interest payments for up to ten years and is required to defer interest on the bonds if it does not meet certain financial performance targets. Another equity-like feature of the bonds is that American Express is required to sell shares of its common stock to raise proceeds to pay interest that it is required to defer.