Webster starts exchange for 8.5% convertibles, 7.65% trust preferreds

By Susanna Moon

Chicago, May 28 - Webster Financial Corp. said it began an offer to exchange shares of its 8.5% series A convertible preferred stock for shares of its common stock plus a cash and Webster Capital Trust IV trust preferred securities for shares of its common stock.

The completion of the exchange offer will fortify the composition of Webster's capital structure by improving its tier 1 common and tangible common equity ratios, and reduce the dividend and coupon expense associated with the securities exchanged, according to a press release.

For each share of convertible preferred, Webster said it will issue 35.8046 common shares and pay $350 in cash.

For each share of trust preferred, Webster will issue common shares equal to $650 divided by the volume-weighted average price of Webster's common stock during the five trading days from June 16 through June 22, to be announced on June 23.

Webster said the amount of securities it may accept in the exchange offer is limited by U.S. Treasury restrictions on the use of cash to repurchase securities in connection with the U.S. Treasury's $400 million preferred stock investment in Webster and New York Stock Exchange rules.

The U.S. Treasury has approved the use of up to $59 million in cash for the convertible preferreds, which means Webster can exchange $168.5 million of the securities.

Under certain conditions, NYSE rules restrict issuance of common stock in an unregistered offering to below 20% of its current issued and outstanding shares. Accordingly, Webster may issue up to 10,531,135 shares in the offer. If the offering is oversubscribed, Webster will accept the securities on a prorated basis.

The exchange offer will expire at 11:59 p.m. ET on June 24.

J.P. Morgan Securities Inc. and Barclays Capital Inc. are financial advisers.

Global Bondholder Services Corp. (866 540-1500 or 212 430-3774) is the information agent and exchange agent.

Waterbury, Conn.-based Webster Financial is the holding company for Webster Bank, NA.

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