Zions begins tender offer for preferreds, plans notes exchange offer

By Angela McDaniels

Tacoma, Wash., June 1- Zions Bancorp has begun a modified Dutch auction tender offer for its series A floating-rate non-cumulative perpetual preferred stock and is planning an exchange offer for its subordinated notes, according to an 8-K filing with the Securities and Exchange Commission.

The company said the offers are two of three actions being taken to modify and enhance its capital. The third component is an equity distribution agreement with Goldman, Sachs & Co. under which the company may offer and sell through or to Goldman Sachs, from time to time, up to $250 million of its common stock.

In the tender offer, the company is offering to purchase up to 4 million of the depositary shares that each represent a 1/40th ownership interest in the preferreds.

Holders are invited to submit bids of $10.00 to $11.50 per depositary share. Each depositary share represents $25 liquidation preference of preferreds.

Zions said the closing price of the depositary shares on May 29 was $11.10.

The offer will expire June 26.

Goldman Sachs (800 828-3182 or 212 357-4692) is the dealer manager. D.F. King & Co., Inc. (800 901-0068 or 212 269-5550) is the information agent.

The company plans to use proceeds from the sale of shares to fund the tender offer. Any remaining proceeds from the sale of common stock will be used for general corporate purposes.

Exchange offer

The company planned to begin the exchange offer for its three outstanding series of subordinated notes June 1.

In the offer, noteholders will be offered $1,000 principal amount of a corresponding newly issued series of subordinated notes for each $1,000 principal amount of notes exchanged.

Following the completion of the exchange offer, the company plans to modify the terms of any notes not exchanged in the offer to allow those notes to be converted into 40 depositary shares each representing a 1/40th ownership interest in a share of either, at the option of the holder, the company's series A preferreds or its 9.5% series C non-cumulative perpetual preferreds.

Each newly issued series of subordinated notes will be identical to the corresponding series of outstanding subordinated notes except for this new conversion feature.

J.P. Morgan Securities Inc. is the company's financial adviser in connection with the exchange offer, and Global Bondholder Services Corp. (866 857-2200 or 212 430-3774) is the information agent.

Zions is a bank based in Salt Lake City.

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