Charles Schwab to Raise $2.5 Billion Via Bond Sales

Charles Schwab (SCHW) said Wednesday it will raise $2.5 billion via bond sales to fund general corporate expenses, including "investments in our subsidiaries and supporting business growth," as the brokerage giant deals with the fallout from the recent turmoil in the banking industry.

Schwab said it will sell $1.2 billion in bonds due in 2029, along with $1.3 billion in notes expiring in 2034. The two securities will have yields to maturity (YTM) of 5.64% and 5.85%, respectively, yielding just over a 2% premium to the 10-year U.S. Treasury note, which is currently trading at 3.6%.

The company has been under financial pressure since March when the collapse of Silicon Valley Bank and Signature Bank prompted the brokerage’s customers to shift cash into money market funds, which are offering higher yields as a result of the Fed’s interest rate hikes. Bank deposits at Schwab dropped by 11%, or roughly $40 billion, in the first quarter.

The bond sale is the latest attempt by the brokerage firm to shore up its finances. In recent months, the company has raised money by issuing certificates of deposit (CDs) and borrowing from the Federal Home Loan Bank, to negate the impact of deposit outflows. Schwab had about $20 billion in long-term debt at the end of the first quarter, about $3.7 billion of which matures by the end of next year.

Charles Schwab shares were roughly flat in premarket trading Thursday. They’re down more than 37% year-to-date, compared to a 5% decline in the broader financial sector over the same period.