Popular begins exchange offer for preferreds, trust preferreds

By Angela McDaniels

Tacoma, Wash., June 29 - Popular, Inc. is offering to issue up to 390 million shares of common stock in exchange for its series A preferred stock, series B preferred stock and trust preferred securities, according to a company news release.

For each $25.00 liquidation preference, the company is offering $20.00 of common stock for its 6.375% non-cumulative monthly income preferreds, 2003 series A, and 8.25% non-cumulative monthly income preferreds, series B, and $25.00 of common stock for the 6.7% cumulative monthly income trust preferreds issued by Popular Capital Trust I and the 6.125% cumulative monthly income trust preferreds issued by Popular Capital Trust II.

For each $1,000 preference amount, the company is offering $800 of common stock for the 8.327% trust preferreds issued by BanPonce Trust I and the 6.564% trust preferreds issued by Popular North America Capital Trust I.

When Popular announced plans for the offer on June 8, it planned to offer $22.50 for each of the 6.7% trust preferreds and 6.125% trust preferreds and $750 for each of the 8.327% trust preferreds and 6.564% trust preferreds.

The number of shares exchanged for each security will equal the dollar amount divided by the greater of (a) the average volume-weighted average price of Popular's stock during the five trading days ending on the second business day immediately preceding the expiration date of the exchange offer and (b) $2.50 per share.

The expiration date for the offer is July 28.

Consent solicitation

The company is also seeking the consent of holders of its series A and B preferreds to issue shares of senior preferreds to the U.S. Treasury in exchange for the series C preferreds currently held by the Treasury under the Troubled Asset Relief Program.

Holders who tender their series A or series B preferreds must grant consents.

If consents are not obtained, the company will seek the agreement of the Treasury to exchange its series C preferreds for newly issued trust preferreds having a distribution rate equal to the dividend rate on the series C preferreds.

If either action occurs, the Treasury will continue to receive distributions on its Popular securities.

As previously reported, Popular will suspend dividends on its common stock and on its series A and B preferreds after paying the previously declared preferred dividends on June 30.

The company expects to continue to make distributions on its trust preferreds.

Popular noted that the U.S. government is not making any new investment in the company or receiving any common stock in connection with the proposed exchange offer.

The company is not one of the banking institutions included in the Supervisory Capital Assistance Program, but it is seeking to increase its tier 1 common/risk-weighted assets ratio in response to the federal banking regulators' "focus on banks putting themselves in a better position in the event of a more adverse economic and credit scenario," chairman and chief executive officer Richard L. Carrion said in a previous news release.

If the offer is fully subscribed, Popular's tier 1 common equity will increase by about $1.2 billion.

Current holders of Popular common stock will continue to own at least 42% of the company's common stock after the proposed exchange offer, assuming maximum acceptance.

UBS Investment Bank (888 719-4210) and Popular Securities (787 766-6601) are the lead dealer managers, and the co-lead dealer manager is Citigroup Global Markets Inc. (800 558-3745).

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

Popular is a financial services provider based in San Juan, Puerto Rico.

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