The South Financial Group (TSFG) has announced a capital plan to add approximately $300 million to $315 million in Tier 1 common capital. These action plans include a privately negotiated exchange of $94.5 million of mandatory convertible preferred stock, a public offering of $75 million of common stock, a public exchange offer for the remaining $95.5 million in mandatory convertible preferred stock conversion of hybrid securities and sales of ancillary businesses, which are estimated to generate capital of $35 million to $50 million.
The company expects that these actions will be completed during the second and third quarters of 2009. Additionally, other components will contribute to capital enhancements, including preferred dividend savings of approximately $35 million and planned reductions in non-core loans and securities of approximately $500 million.
In particular, these capital actions would provide TSFG with a sufficient capital to accommodate the “more adverse” credit scenario used by the US government in its recently completed Supervisory Capital Assessment Programme (SCAP).
Morgan Stanley is acting as sole bookrunner in connection with the common equity offering. Lynn Harton, President and CEO, said: “Execution of our capital plan would make our currently strong capital position even stronger and equip us to withstand the SCAP more adverse credit scenario. Upon completion of our announced capital plan, we will be well-positioned to take advantage of our ongoing strategic initiatives and growth opportunities.”
