Burke & Herbert Financial Services Corp. priced a $100.0 million subordinated notes offering at par, with the new debt carrying a 7.00% fixed rate through Oct. 1, 2031 before switching to a floating rate of three-month term SOFR plus 222 basis points until maturity on Oct. 1, 2036.
The company said it expects to close the offering on Sept. 30, 2026. The notes are intended to qualify as Tier 2 capital.
Proceeds, together with cash on hand, are earmarked for several uses. Burke & Herbert plans to repay $4.5 million of its 6.875% subordinated note due 2028, $18.1 million of its 6.00% fixed-to-floating subordinated notes due 2030, and $20.0 million of its 5.00% fixed-to-floating subordinated notes due 2030. It also said it may repay all or part of $75.0 million of 3.25% fixed-to-floating subordinated notes due 2031 and may redeem all or part of $15.0 million of 2021 preferred stock.
The company delivered a conditional notice of redemption for the July 2030 notes, tied to the completion and size of this new offering. A notice of prepayment was also delivered on the 2028 note, and that repayment is not contingent on the new sale.
The new issue replaces higher-cost debt: the notes being targeted for repayment carry coupons of 6.875%, 6.00%, and 5.00%, compared with the new 7.00% fixed rate only for the first five years before the floating period begins. As a result of these announcements, the company's shares have moved -0.74% on the market, and are now trading at a price of $68.55. For the full picture, make sure to review Burke & Herbert Financial Services's 8-K report.
