Item 2.03.
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Creation of a Direct Financial Obligation of a Registrant or an Obligation under an
Off-Balance
Sheet Arrangement of a Registrant.
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On August 9, 2018, Discover
Bank (the Bank), a wholly-owned subsidiary of Discover Financial Services (the Company), issued and sold $500,000,000 aggregate principal amount of its 4.682%
Fixed-to-Fixed
Rate Subordinated Notes due 2028 (the Notes). The Notes were issued pursuant to a Fiscal and Paying Agency Agreement, dated August 9,
2018 (the FPAA), between the Bank, as issuer of the Notes, and U.S. Bank National Association, as fiscal and paying agent. The Notes were issued pursuant to an exemption from registration provided by Section 3(a)(2) of the
Securities Act of 1933, as amended.
The indebtedness of the Bank evidenced by the Notes, including principal and interest, is unsecured
and subordinated to the claims of depositors and general creditors of the Bank and, consequently, junior in right of payment to the Banks obligations to its depositors, its obligations under bankers acceptances and letters of credit, its
obligations to any Federal Reserve Bank or the Federal Deposit Insurance Company (the FDIC) and its obligations to its other creditors, and to any rights acquired by the FDIC as a result of loans made by the FDIC to the Bank or the
purchase or guarantee of any of its assets by the FDIC pursuant to the provisions of 12 U.S.C. Section 1823(c), (d) or (e), in each case whether now outstanding or hereafter incurred (except any obligations that expressly rank on a parity
with or junior to the Notes).
Subject to any redemption prior to August 9, 2028, the Notes will bear interest (i) from and
including August 9, 2018 to, but excluding, August 9, 2023, at the rate of 4.682% per annum and (ii) from and including August 9, 2023 to, but excluding August 9, 2028 at a rate per annum which will be 1.730% above the
5-Year
Mid-Swap
Rate (as defined in the FPAA). Interest on the Notes will be payable semi-annually in arrears on February 9 and August 9 of each year, commencing on
February 9, 2019, and on the date of maturity (each, an Interest Payment Date). Payments will include interest accrued to, but excluding, the relevant Interest Payment Date. Interest on the Notes will be calculated on the basis of a
360 day year of twelve 30 day months.
A copy of the FPAA, which includes the form of Note as an exhibit thereto, is filed with
this Current Report on
Form 8-K
as Exhibit 4.1 and is incorporated herein by reference.