TruPS Redemption on Zions' Cards

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After receiving partial approval for its new capital plan from the Federal Reserve, Zions Bancorp. (ZION) commenced with the implementation of the same. Consequently, the company announced its plans to redeem Series B Trust Preferred Securities (TruPS).

The company will redeem 8% Series B TruPS comprising 11.4 million shares. Collectively, these securities have a liquidation value of $285 million. The redemption is scheduled on May 3, 2013.

Zions has fixed the price of redemption of its securities at 100% of the liquidation amount which equals to $25 per share. The company will pay this redemption price along with the distributions outstanding and due on the securities up to the date of redemption to its shareholders.

In Mar 2013, the Fed partially approved Zions’ Capital Plan, due to which the company is required to re-submit its capital plan after incorporating a few amendments. The capital plan includes the redemption of Series C perpetual preferred stock worth $600 million and subordinated debt and senior debt worth $250 million. In addition, Zions plans to issue $600 million of additional perpetual preferred stock that includes $171 million worth of Series G preferred shares, which have been issued in Feb 2013.

Further, Zions has sought to redeem Series C shares worth $798 million. Also, management is keen on receiving approval to issue an additional perpetual preferred stock worth $200 million to fully redeem the Series C stock.

Apart from Zions, other financial institutions that have implemented their capital plans after receiving the Fed’s approval include Citigroup, Inc. (C) and Bank of America Corporation (BAC). Citigroup plans to redeem TruPS worth $3 billion. On the other hand, BofA will be redeeming 8.20%, Series H, non-cumulative preferred stock and 8.625%, Series 8, non-cumulative preferred stock.

The redemption of the TruPS is expected to auger well for Zions as it will provide an opportunity to the bank to reduce its interest expenses and will help in restructuring the balance sheet.

Zions currently carries a Zacks Rank #3 (Hold). Among others, American River Bankshares (AMRB) is a better performing bank with a Zacks Rank #2 (Buy).

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