Popular Inc. announced Thursday it has agreed to sell $450 million of its senior notes, due in 2019, to pay off its Troubled Asset Relief Program debt with the U.S. Treasury.
The financial institution intends to use about $400 million of the net proceeds from the offering, plus available cash, to redeem its junior subordinated debentures held by Popular Capital Trust III, at a redemption price of 100 percent of the principal amount outstanding, plus accrued and unpaid interest.
The trust will in turn redeem the $935 million of its capital securities held by the U.S. Treasury, in exchange for the 935,000 shares of Popular’s Series C preferred stock initially issued in December 2008 to the U.S. Treasury under the TARP Capital Purchase Program.
Popular intends to use the remaining net proceeds from the offering to provide additional liquidity to the holding company, the bank said in a statement.
A week ago, Popular Inc. CEO Richard Carrión said this transaction was in the works, after the bank got the go-ahead from regulators to repay the amount due.
The Senior Notes will bear interest at a rate of 7 percent per year, payable on Jan. 1 and July 1 of each year, starting Jan. 1, 2015. The senior notes will mature July 1, 2019.
J.P. Morgan Securities LLC is serving as Capital Advisor related to Popular’s capital plan and TARP repayment acting as the sole book-running manager of the offering. Goldman, Sachs & Co. is acting as senior co-manager and Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Drexel Hamilton, LLC, Guggenheim Securities, LLC, Keefe, Bruyette & Woods, Inc., Nomura Securities International, Inc., Popular Securities, LLC, RBC Capital Markets, LLC, Sandler O’Neill & Partners, L.P. and Wells Fargo Securities, LLC are acting as co-managers of the offering.
The offering is being conducted as a public offering via a prospectus filed with the Securities and Exchange Commission. Popular expects to close the offering on or about July 1, 2014.