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June 14, 2010
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On Friday, Zions Bancorp. (ZION) announced that it has priced 5 million preferred shares worth $125 million at an initial public offering price of $25 per depositary share. The offering is priced at an initial dividend rate of 11%.
Post offering, each depositary share represents a 1/40th ownership interest in a share of Series E Fixed-Rate Resettable Non-Cumulative Perpetual Preferred Stock.
Further, in a situation to cover excess demand, the underwriters have been given a 30-day option to purchase additional shares up to 750,000 for total gross proceeds of around $18.75 million.
Moreover, the preferred shares will be redeemable, in whole or in part on June 15, 2012. If not redeemed, the dividend rate on the shares will change around such dates. The new dividend rate will be equal to 2-Year Treasury Rate on such dates plus 10.22%.
While Deutsche Bank Securities Inc., a wing of Deutsche Bank AG (DB), J.P. Morgan Securities Inc., a unit of JPMorgan Chase & Co. (JPM), Macquarie Capital (USA) Inc., UBS Securities LLC and Zions Direct Inc. acted as joint book running managers for the offering, Jefferies & Company, Inc., a division of Jefferies Group Inc. (JEF), BB&T Capital Markets of BB&T Corp. (BBT), D.A. Davidson & Co., FBR Capital Markets & Co. and Morgan Keegan & Company Inc. acted as co-managers.
Zions is expected to use the net proceeds of the offering for general corporate purposes and plans to invest in interest-bearing investment grade securities. The preferred stock offering has boosted Zions’ capital reserves. The company expects the depositary shares to be approved for listing on the New York Stock Exchange under the symbol "ZBPRE."
Last month, Zions also announced a series of capital actions that it intends to complete during the second quarter of 2010 to preserve and enhance its capital ratios and financial flexibility.
In May, Zions commenced an underwritten public offering of warrants to acquire shares of the Zions’ common stock, each initially representing the right to purchase one share of the common stock, for aggregate gross proceeds of $150 million. The current offering is also a part of a series of capital actions announced last month.
Zions anticipates that the capital actions taken will improve Tier 1 capital position of the company as well as Tier 1 capital to risk-weighted assets and tangible book value.
Zions’ closest competitors were also involved in similar capital actions. Last week, US Bancorp (USB) sold $1 billion of three-year notes priced at $99.875 to yield 2.04%.
Further, last month, Zions’s closest competitor Wells Fargo & Co. (WFC) acquired 70.2 million warrants to purchase Wells Fargo common stock in an auction conducted on behalf of the U.S. Treasury by Deutsche Bank Securities. The warrants were issued by Wells Fargo to the U.S. Treasury in connection with its investment in Wells Fargo under the Capital Purchase Program.
Over the long run, Zions intends to continue to maintain asset-sensitive balance sheet position with regard to interest rate risk, which is reflected in the capital actions taken by the company.
Read the full analyst report on "ZION"
Read the full analyst report on "USB"
Read the full analyst report on "WFC"
Read the full analyst report on "DB"
Read the full analyst report on "BBT"
Read the full analyst report on "JPM"
Read the full analyst report on "JEF"
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