By William Hamilton
PBN Staff Writer
PHILADELPHIA – Sovereign Bancorp Inc. (NYSE: SOV), the parent of Sovereign Bank, today announced it will conduct a public offering of $1 billion of shares of common stock.
Sovereign said it also plans to offer $500 million of fixed subordinated notes, due in 2018, once the bank has obtained regulatory approval from the federal Office of Thrift Supervision.
For the common stock offering, Lehman Brothers Inc. is acting as the book-running manager and will have an option to purchase up to $150 million of addition shares of the company’s common stock to cover over-allotments.
Sovereign said it intends to use the proceeds from both offerings for general corporate and banking purposes.
The Philadelphia-based bank has been hit hard by mortgage and other consumer credit losses. It eliminated its dividend in January after posting a fourth-quarter loss of $1.6 billion. It also has stopped making auto loans in the Southeast and Southwest, where losses for it and other companies have been particularly high. And it has withdrawn from the student-loan market.
For the first quarter, however, Sovereign posted a profit of $100.14 million, more than twice the year-ago $48.06 million. Earnings per diluted share were 20 cents, one cent below what analysts have predicted for the company.
On Friday, the Financial Times had reported that Sovereign was looking to raise $1 billion to $2 billion in capital from investors led by Spain-based Grupo Santander. (READ MORE)
Santander, which already owns a 24.9-percent stake in the bank, wanted to provide all the fresh capital, a source close to the negotiations told the Times. But that would have required a vote at Sovereign on whether to allow the Spanish company to expand its holdings, a move the bank reportedly hoped to avoid.
“During these challenging economic times, we are committed to building our capital ratios over and above their already well-capitalized status, and will remain disciplined on credit risk-management practices,” Sovereign President and CEO Joseph P. Campanelli, at right, and non-executive Chairman P. Michael Ehlerman wrote this spring in the company’s 2007 annual report. “With the simplification of our business model and changes to our organizational structure, we are now better positioned to execute on our strategy of getting back to the basics: gathering deposits and making loans.”
Sovereign Bancorp Inc. (NYSE: SOV), the parent company of Sovereign Bank, is a $90 billion financial institution with nearly 800 community banking offices, more than 2,000 ATMs and about 12,000 employees, mostly in the Northeast. For additional information, visit www.sovereignbank.com.
