Puerto Rico's Popular (Nasdaq: BPOP) has received preliminary approval from the US Treasury Department to sell US$950mn of preferred stock under the capital purchase program (CPP) as part of the troubled assets relief program (TARP).
"These funds provide us financial flexibility in the current economic scenario, possible opportunities in Puerto Rico and, most importantly, the opportunity to invest in the communities we serve," CFO Jorge Junquera told BNamericas.
Last month, Junquera said the bank was looking to ask the Treasury for a capital injection in the US$300mn-900mn range.
The preferred stock will carry a 5% coupon for five years and a 9% coupon thereafter, Popular said in a statement.
In addition, the Treasury will receive warrants to purchase up to US$143mn of Popular's common shares, which will expire 10 years from issuance.
"This investment further improves the liquidity and capital position of Popular as we strive to meet the needs of our customers and communities in the current challenging economic environment," said Richard L Carrion, chairman and CEO.
The amount of preferred stock to be purchased by the Treasury represents approximately 3% of Popular's consolidated risk-weighted assets as of June 30, which amounted to US$32.1bn.
WEATHERING THE CRISIS
While Popular claims to remain at "well capitalized" levels, its capital has declined from the levels it has historically maintained.
Its tier one capital ratio stood at 9.09% as of September 30 compared to 10.7% a year ago, with the total capital ratio falling to 10.35% from 11.98%, according to a presentation to investors posted on its website.
Popular said it has resolved liquidity concerns through the recent sale of certain assets of its US mortgage subsidiary Popular Financial Holdings (PFH) to various Goldman Sachs (NYSE: GS) affiliates and the issuance of US$350mn worth of notes in private offerings.
The PFH sale provided Popular with more than US$700mn in additional liquidity and significantly reduced its US subprime assets.
"We now have enough cash on hand to meet all obligations due through 2009," the presentation reads, adding management expects the island's economic weakness to continue into 2009.
Popular recently announced a number of steps to restructure its US banking operations, including greater integration with corporate operations in Puerto Rico, the consolidation or sale of underperforming branches and the closing, sale or downsizing of lending businesses that do not generate deposits or fee income.
"The focus in the Puerto Rican business will be on asset quality, collections and efficiency," the presentation reads.
Popular booked a US$669mn or US$2.42 per share loss in this year's third quarter, down from a US$36mn or US$0.12 per share profit in the same quarter last year on rising loss loan provisions and the PFH sale.
Popular is a financial services provider based in Puerto Rico with operations in Puerto Rico, the US, the Caribbean and Latin America. The firm is the leading financial institution in Puerto Rico with over 300 branches and offices.
No comments:
Post a Comment