First Bank’s parent company gearing up for stock offering
First BanCorp, parent company of First Bank, is getting ready to to price a $500 million secondary common stock offering next week, as an effort to shore up its finances.
The bank, which has been struggling for the better part of the last year — and survived a round of bank closings by the Federal Deposit Insurance Corporation on the island in May — is looking to generate revenue to improve its condition. Although weakened by a string of mortgage loan defaults, FirstBank tried unsuccessfully to raise capital to participate in the FDIC transactions, through which Westernbank, R-G and Eurobank were closed and sold to Banco Popular de Puerto Rico, Scotiabank and Oriental Bank, respectively.
Earlier this week, First BanCorp announced its plans to raise capital, a move that would be good for the bank, but not so positive for current shareholders, whose stock value will be diluted by the discounted share sale. First BanCorp’s stock — which has already dropped by 97 percent this year — closed at 30 cents Friday.
Still, FirstBanCorp’s seemingly does not have an option but to sell stock, as it has been ordered by the FDIC and the Office of the Financial Institutions Commissioner to improve its finances to avoid closure.
The capital raise would trigger the conversion into common stock of preferred shares owned by the U.S. Treasury Department, which First BanCorp received through the Troubled Asset Relief Program, according to Dow Jones.
