Discount brokerage Charles Schwab Corp. said on Monday it is undertaking a $3.5 billion capital restructuring program following completion of the sale of U.S. Trust Corp., sending its shares up more than 7 percent.

The program includes a special dividend, share buyback plan and debt offerings.

The company said it would return $1.2 billion to shareholders through a special cash dividend of $1.00 per share.

It also announced it will buy back up to 84 million shares through a $2.3 billion share repurchase program.

The buyback will be structured through a modified Dutch Auction tender offer and a separate stock purchase agreement with Schwab Chief Executive Charles Schwab.

The CEO, who is the brokerage's largest shareholder and owns 18 percent of the company, will not participate in the tender offer, the company said.

But he will sell up to 18 million shares to the company after the tender offer is completed.

The stock purchase agreement is designed to maintain the CEO's current ownership percentage.

The company has already repurchased 33.4 million shares for $642 million under an existing buyback program this year.

The company also announced debt offerings of up to $750 million in the form of senior notes and hybrid capital securities.

The U.S. Trust sale generated after-tax proceeds of $2.7 billion, the company said.

The company agreed to sell its U.S. Trust wealth management subsidiary to Bank of America in November 2006.

Credit rating agency Moody's affirmed its A2 rating on Schwab, saying the company's capital structure remains sound relative to its operating risk profile even after the restructuring.

Standard & Poor's Ratings Services also affirmed its A-/A-2 rating on Schwab on the company's underlying strengths and capital foundation.

Separately, Schwab said it would pay out a regular quarterly cash dividend of 5 cents per share.

Schwab shares were up 7.1 percent, or $1.45, at $21.98 in afternoon trading on the Nasdaq.

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