Prudential Financial’s $1.5 Billion Contingent Capital Facility

May 22, 2020

Cleary Gottlieb represented the initial purchasers, Credit Suisse, BofA Securities, Citigroup, J.P. Morgan, Wells Fargo Securities, MUFG, and US Bancorp, in an offering of $1.5 billion of pre-capitalized trust securities redeemable May 15, 2030 (the P-Caps), issued by Five Corners Funding Trust II on May 22, 2020.

The trust invested the proceeds of the sale of the P-Caps in a portfolio of U.S. Treasury strips and entered into a facility agreement with Prudential Financial Inc. (PFI) under which PFI may issue up to $1.5 billion of its unsecured 2.85% senior notes due May 15, 2030 from time to time to the trust in exchange for an equal amount of treasuries. The structure was designed to give PFI a source of liquid assets and allow PFI to maintain competitive capital levels after a stress event has occurred, while providing P-Caps investors a risk profile equivalent to a direct investment in PFI senior debt. The P-Caps were offered under Rule 144A under the Securities Act and Section 3(c)(7) of the Investment Company Act and are currently rated the same as PFI senior debt by S&P and Moody’s.

Credit Suisse also acted as sole structuring advisor.

PFI is a financial services leader with approximately $1.481 trillion of assets under management as of March 31, 2020, and has operations primarily in the United States, Asia, Europe, and Latin America. Its businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management.