On Tuesday, Cullen/Frost Bankers, Inc. (CFR) announced the pricing of a public offering of non-cumulative perpetual preferred stock worth approximately $150 million. The offering is expected to close on Feb 15, 2013, subject to customary closing conditions. The liquidation amount is set to be $25 per share.
The offering includes 6,000,000 shares of the company’s non-cumulative perpetual preferred stock, Series A, which qualifies as Tier 1 capital and carries a coupon rate of 5.375%. The joint-book running managers for the offering are Morgan Stanley ( MS), Goldman Sachs ( GS) and UBS Investment Bank, a unit of UBS AG ( UBS).
The proceeds from the issuance and sale of the preferred stock are expected to be roughly $144.5 million (after subtracting underwriting discount and commissions, as well as the payment of estimated expenses).
The company plans to use the proceeds to repurchase its common shares. This is in accordance to the terms of the company’s accelerated share repurchase agreement with Goldman Sachs. Under the terms of the deal, Cullen/Frost will pay $144.0 million to Goldman Sachs on Feb 15, 2013 and will receive common shares in exchange.
A sizeable amount of the shares are anticipated to be delivered on Feb 15, with the remaining amount expected upon completion of the program. However, the total number of shares that Cullen/Frost will obtain and the total amount paid will depend on the volume-weighted daily average price of Cullen/Frost’s common share during the tenure of the repurchase program.
Cullen/Frost currently retains a Zacks Rank #3 (Hold).
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