Discover files $1.4 billion TARP preferreds, warrants for trading

By Susanna Moon

Chicago, April 8 - Discover Financial Services registered the $1.22 billion of series A fixed-rate cumulative perpetual preferred stock it sold to the U.S. Treasury under the Troubled Asset Relief Program for public trading in an S-3 shelf registration with the Securities and Exchange Commission.

Also covered under the registration is $183.68 million warrants to purchase 20,500,413 common shares, exercisable at $8.96 until March 13, 2019.

The preferreds pay cumulative dividends at 5% per year until March 14, 2014, after which they step up to 9%.

The preferreds may not be redeemed prior to May 15, 2012 unless the company has obtained proceeds from one or more equity offerings of $306.15 million.

Riverwoods, Ill.-based Discover said it will not receive proceeds from the reselling holders.

Issuer:	Discover Financial Services
Issue:	Series A preferred stock
Amount:	$1,224,558,000 (plus $183,683,700 warrants)
Maturity:	Perpetual
Dividend:	5%, steps up to 9% after five years
Call option:	Before May 15, 2012 only with proceeds from equity offering(s) of $306,147,000; afterward at par
Warrants:	For 20,500,413 shares
Warrant exercise price:	$8.96
Warrant expiration:	March 13, 2019

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