Puerto Rico's Popular (Nasdaq: BPOP) has entered into a an agreement with the US Treasury to sell US$935mn worth of preferred shares under the troubled assets relief program (TARP).
Last month, Popular received preliminary approval from the Treasury to sell up to US$950mn of preferred stock.
The transaction closed on December 5, Popular said in a statement.
Popular agreed to issue and sell to the Treasury 935,000 shares of its C series preferred stock and a warrant to purchase 20.9mn shares of Popular's common stock at US$6.70 per share.
The preferred shares qualify as tier one regulatory capital and will carry a 5% coupon for five years and a 9% coupon thereafter.
"This is good news because it is relatively cheap capital that will increase liquidity for the bank and strengthen the balance sheet," Keefe, Bruyette & Woods analyst Bain Slack told BNamericas.
The funds will also lift Popular's capitalization ratios, which remain healthy but below historical levels. Its tier one capital ratio stood at 9.09% as of September 30 compared to 10.7% a year ago.
The capital injection would lift Popular's tier one risk-based capital ratio to 12%, Raymond James (NYSE: RJF) analyst Anthony Polini told BNamericas.
Popular booked a US$669mn loss in this year's third quarter compared to a US$36mn profit in the same quarter last year due to rising loan loss provisions and the sale of certain assets of its US mortgage subsidiary Popular Financial Holdings (PFH).
Popular is in the process restructuring its US banking operations, including consolidating or selling underperforming branches and closing, selling or downsizing those lending businesses that do not generate deposits or fee income.
San Juan-based Popular is the largest financial institution in Puerto Rico with more than 300 branches and offices and also operates in the US, the Caribbean and Latin America.
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