Terms

Series

Floating Rate Non-Cumulative Preferred Stock, Series 4

Liquidation Preference

$25.00

Rate Type

Floating

Payment Frequency

Quarterly

Cumulative

No

Perpetual

Yes

Convertible

No

Callable

Yes

First Call Date

November 28, 2010

First Call Price

$25.00

Redemption Notice Period

30 days

Capital Stack Ranking

Junior To: All Debt Obligations Of Ml&Co., Creditors Of Ml&Co.'S Operating Subsidiaries (Structural Subordination), Any Class Or Series Of Ml&Co. Stock Expressly Ranking Senior To Series 4 Preferred Stock As To Dividends; Pari Passu With: Floating Rate Non-Cumulative Preferred Stock, Series 1, Floating Rate Non-Cumulative Preferred Stock, Series 2, 6.375% Non-Cumulative Preferred Stock, Series 3, Any Other Preferred Stock Ranking On A Parity; Senior To: Ml&Co. Common Stock, Series A Junior Preferred Stock, Any Other Stock Expressly Made Junior To Series 4 Preferred Stock

Regulatory (Basel III) Call

No

Tax Classification

Qualified Dividend

Qualifies for QDI

Yes

Qualifies for DRD

Yes

Depositary Share Fraction

0.000833

Shares Offered

9,600,000

Prospectus Summary

Merrill Lynch & Co., Inc. is offering 9,600,000 depositary shares, each representing a 1/1,200th interest in a share of its perpetual Floating Rate Non-Cumulative Preferred Stock, Series 4, with a liquidation preference of $25.00 per depositary share. Dividends are paid quarterly on February 28, May 28, August 28, and November 28, at a floating rate of 3-month USD LIBOR plus 0.75%, subject to a minimum floor rate of 4.00% per annum. The Series 4 is non-cumulative, meaning that if the board does not declare a dividend for any quarter, that payment is permanently forfeited and will never be made up—investors bear the risk of missed income with no recourse. The Series 4 Preferred Stock ranks senior to ML&Co.'s common stock and any junior-ranking equity, and on a parity with its Series 1, Series 2, and Series 3 preferred stock. It is junior to all of ML&Co.'s debt obligations. Critically, because ML&Co. is a holding company whose assets consist largely of equity interests in operating subsidiaries, preferred holders face structural subordination: in a stress scenario, subsidiary creditors have first claim on subsidiary assets before any value reaches ML&Co. The prospectus does not contain a traditional regulatory call provision (the issuer cannot redeem the shares simply because they lose Tier 1 Capital status); instead, if ML&Co. elects Tier 1 treatment, terms may be auto-amended—potentially restricting the issuer's own redemption right rather than accelerating it. The stock is not redeemable before November 28, 2010, with 30–60 days' notice required thereafter. At the 4.00% floor, the annual dividend per depositary share is approximately $1.00, representing an effective yield of 4.00% at the $25.00 liquidation preference; actual payments will vary with 3-month LIBOR resets each quarter. Dividends on ML&Co. preferred stock issued by a C-corporation generally qualify for the preferential 15%/20% qualified dividend income (QDI) rate for individual investors and the dividends-received deduction (DRD) for eligible corporate holders, though the prospectus does not explicitly confirm this for Series 4. The dividend stopper prevents ML&Co. from paying common stock dividends or repurchasing junior shares if Series 4 dividends for the prior period were not paid in full—providing a modest protection for preferred holders, though it does not compel the board to declare dividends.

Summarized from the SEC prospectus filing.

Distribution History

Floating Rate Terms

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If ML&Co. fails to declare and pay full dividends on the Series 4 Preferred Stock for the immediately preceding dividend period, it is prohibited from paying dividends on or repurchasing its common stock or any junior-ranking stock (with limited exceptions); conversely, if ML&Co. is in arrears on any senior-ranking preferred stock, it cannot pay dividends on the Series 4 Preferred Stock.

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 75 (Strong)