First Merchants Corporation has entered into a definitive agreement to issue $100 million in aggregate principal amount of 6.750% Fixed-to-Floating Rate Subordinated Notes due 2036. The company, an Indiana corporation, entered into the Base Indenture and a First Supplemental Indenture with U.S. Bank Trust Company, National Association, acting as trustee. The filing details the terms of the Notes, which are registered pursuant to an effective shelf registration statement on Form S-3ASR (File No. 333-298983).
The Notes will bear interest at an initial rate of 6.750% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2027. From October 1, 2031, through October 1, 2036, the interest rate will convert to a floating rate. This floating rate is calculated as a benchmark rate reset quarterly plus 202 basis points. The benchmark is expected to be Three-Month Term SOFR; however, if the benchmark is less than zero, it will be deemed to be zero. Interest during this floating period will be payable quarterly on January 1, April 1, July 1, and October 1, beginning January 1, 2032.
The Notes are set to mature on October 1, 2036, unless redeemed earlier. The Corporation has the option to redeem the Notes in whole or in part, beginning on October 1, 2031, at a price equal to 100% of the principal amount plus accrued interest. Additionally, the Notes may be redeemed in whole but not in part prior to October 1, 2031, subject to Federal Reserve approval, if a Tax Event occurs, if there is a risk the Notes would not qualify as Tier 2 capital, or if the Corporation is required to register as an investment company under the Investment Company Act of 1940. The filing includes legal opinions from Dentons Bingham Greenebaum LLP regarding the legality of the Notes.
