(Source: Business Wire)
Regions Financial Corporation (NYSE: RF) today announced that it has commenced public offerings of $1 billion of its common shares and $250 million of new mandatory convertible preferred shares (the "Cash Offers"). The underwriters in the Cash Offers will have a 30-day option to purchase up to an additional 15 percent of the offered amounts of common shares and mandatory convertible preferred shares, as the case may be, from the company. Goldman, Sachs & Co., and J.P. Morgan Securities Inc. will serve as joint bookrunning managers for the Cash Offers and Morgan Keegan & Co. Inc., will be lead manager. Regions has filed or is filing prospectus supplements with the Securities and Exchange Commission in connection with the Cash Offers.
The company also announced that it is offering to exchange common shares for outstanding 6.625% Trust Preferred Securities issued by Regions Financing Trust II (the "Exchange Offer.")
Under the terms of the Exchange Offer set forth in the company's prospectus dated May 20, 2009, and the related letter of transmittal, Regions will issue a number of common shares having a value (based on the "Relevant Price") equal to $700 for each Trust Preferred Security accepted for exchange. The "Relevant Price" is the greater of (i) the average volume weighted average price of Regions common shares during the last five trading days of the currently scheduled exchange offer period, and (ii) the "Minimum Share Price" of $2.65 per share. The Exchange Offer will expire at 11:59 p.m., Eastern time, on Wednesday, June 17, 2009, unless extended or earlier terminated.
The mandatory convertible preferred shares will convert into a variable number of shares of Regions common stock on December 15, 2010, unless earlier converted at the option of a holder or Regions. The conversion rate and the dividend rate on such securities will be determined by negotiations between Regions and the underwriters.
The Cash Offers and the Exchange Offer are the first steps of a comprehensive Capital Plan to satisfy the $2.5 billion Tier 1 common equity requirement prescribed by the Federal Reserve's Supervisory Capital Assessment Program ("SCAP"), which Regions currently expects will be accomplished without further investment by the U.S. Treasury in Regions. The common shares expected to be issued in the Cash Offer and the Exchange Offer will qualify as Tier 1 capital and Tier 1 common equity. The mandatory convertible preferred shares in the Cash Offer are also expected to satisfy a portion of the capital requirement identified by SCAP. The remaining capital needed is expected to be raised through a combination of actions including (i) additional liability management actions including possible exchanges of equity for our and Regions Bank's $4.25 billion of outstanding subordinated debt and $345 million of additional trust preferred securities, (ii) sales of non-core assets and businesses, (iii) pre-provision earnings in excess of the amounts assumed under the SCAP analysis, (iv) a potential reduction in disallowed deferred tax assets as a result of increased Tier 1 capital levels, and (v) if necessary, the issuance of common equity and other Tier 1 common equity qualifying instruments.
