Burke & Herbert Financial Services Corp. has completed the sale of $100 million in subordinated debt. The company issued 7.00% Fixed-to-Floating Rate Subordinated Notes due 2036, priced at 100% of their face value. The offering was underwritten by Keefe, Bruyette & Woods, Inc. as the sole book-running manager.
The notes are structured to qualify as Tier 2 capital for regulatory purposes. Interest will be paid semi-annually in arrears at a fixed rate of 7.00% per annum from September 30, 2026, until October 1, 2031. After that date, the interest rate will convert to a floating rate based on the Three-Month Term SOFR plus 222 basis points, payable quarterly.
Burke & Herbert plans to use the net proceeds from this offering, combined with existing cash on hand, to manage its existing debt obligations. The company intends to repay $4.5 million of its 6.875% subordinated note maturing in April 2028, $18.1 million of its 6.00% subordinated notes maturing in July 2030, and $20.0 million of its 5.00% subordinated notes maturing in October 2030. Additionally, the company may use the funds to repay or redeem portions of its $75.0 million 3.25% subordinated notes maturing in December 2031 and its $15.0 million liquidation preference of 2021 Preferred Stock. The remaining proceeds are designated for general corporate purposes, including providing capital to Burke & Herbert Bank & Trust Company to support its growth.
The notes are subordinated to the company's senior debt and are structurally subordinated to the obligations of its subsidiaries, including the bank.
