First BanCorp sells 24.9% stake to private equity firm
After many months of talk that it would sell its operation off partially or entirely to offset its financial problems, First BanCorp on Tuesday announced it has entered into a definitive investment agreement with private equity firm Thomas H. Lee Partners, L.P. under which THL would purchase about $180 million of the bank’s common stock.
Upon completion of the transaction, THL would own about 24.9 percent of First BanCorp, FirstBank Puerto Rico’s parent company. The deal calls for converting into common stock nearly $425 million of the Series G preferred stock currently owned by the U.S. Department of Treasury, bank officials said Tuesday.
“We are pleased to announce this agreement with THL, as this is a critical and positive step in the capital raising process,” said First BanCorp President Aurelio Alemán. “The THL agreement with First BanCorp is a testament to our franchise’s strength as the second largest banking franchise on the island and our potential in the markets we serve, as well as evidence of the confidence of investors of this caliber in the Puerto Rico banking industry going forward.”
The THL transaction is conditioned upon the Corporation selling a minimum of $500 million, but no more than $550 million, of common stock (including the THL investment), approval by the corporation’s stockholders of all of the sales of common stock and any required approvals by bank regulatory authorities or other governmental authorities.
Through the agreement, THL will have the right to designate a person to First BanCorp’s board.
The stock sold to THL went for $3.50 a share, a price that will be extended to the bank’s existing common stock holders after the transaction with THL closes, to raise up to $35 million in additional common equity, “which…would count towards the aggregate $500 to $550 million capital raise.”
The struggling bank would use the proceeds from its common stock sale to strengthen its capital base, thus complying with regulatory requirements from stateside and local banking agencies that have been keeping close tabs on the bank. While in a precarious situation, First BanCorp has been able to hold on even after three other local banks were closed last year due to insolvency.
“The sale of common stock will strengthen the corporation’s balance sheet and capital ratios, and will allow us to continue executing our business strategies and seize opportunities as they arise,” Alemán said.