WASHINGTON - Riggs National Corp. on Friday privately sold $139 million in common and preferred stock, raising 30% more than originally planned.
The Washington, D.c.-based banking company sold $39 million of common stock and $100 million in preferred stock to U.S. and European institutional investors. Net proceeds were $132.3 million.
Barbara Allbritton, a director of Riggs and wife of chairman Joe Allbritton, purchased 1.33 million newly issued common shares, worth $10.3 million, a spokesman said.
With the purchase, the Allbritton family holds about 33% of the company's common stock, about the same as before the issue, he said.
The sale gives Riggs the means to focus on expanding business following nearly $100 million in losses during the first half of the year from souring loans in its London operations and commercial real estate portfolio.
|Not Going out of Business'
"This is obviously a very clear sign of their viability - they are not going out of business," said Christoper Marinac, analyst at Interstate/Johnson Lane Corp. in Atlanta. "Now that they have capital, they have the ability to work through the problems of the bank and work it through to profitability."
The $4.6-billion-asset bank initially planned to raise $70 million in preferred stock and $30 million in common stock, but the issue was oversubscribed, said a spokesman. Dillon, Read & Co., New York, and Friedman, Billings, Ramsey & Co., Washington, were placement agents for the offering.
Satisfying the Fed
Proceeds will raise Riggs' leverage capital ratio to 5.73%, from 3.02% before the stock sale, said a spokesman.
The Fed requires a 3% leverage capital ratio for the best-rated banks, while lower-rated banks like Riggs are generally required to maintain a 4.5-5% leverage ratio, the spokesman said. He said the Fed had not set a specific target for Riggs. The company's bank subsidiaries are in full compliance with regulatory requirements, he-said.
Riggs follows in the footsteps of other banking companies recovering from severe asset problems that have tapped the private markets for equity capital, including New Jersey-based Midlantic Corp., which raised $113 million this summer, and First Eastern Corp. of Wilkes-Barre, Pa., which raised about $27 million early this year.
The Riggs offering included five million common shares at $7.75 each, a 17% discount to the $9.13 Thursday closing price, and four million shares of noncumulative preferred, with a par value of $25, having an annual dividend rate of 10.75%.
A bank spokesman said the discounted offering price was due to the illiquidity of the stock, which cannot be sold by investors until it is registered with the Securities and Exchange Commission.
Said to Reflect a Run-Up
"These shares are still far from being given away. Seven dollars and seventy-five cents is still 141% of book value," he said. The stock is being registered with the SEC, he said, but declined to predict when approval would be received.
One source said the large discount reflects the run-up of Riggs' stock since marketing of the placement began in early October. At that time, the stock was closer to $8 per share, said the source, who added that institutional investors had considerable leverage over the offering price. Riggs common stock had fallen as low as $6.50 this summer, before the second-quarter loss was reported.
Interstate Johnson has been a strong proponent of the stock since putting on a "buy" recommendation on September 10.
New CEO Seen as Key
A key part of Riggs' turnaround plans was the hiring in June of Paul Homan to serve as president and chief executive officer. Homan brings with him a reputation for knowing how to fix problem banks, and recently was president of First Florida Banks of Tampa, before it was sold to Barnett Banks Inc. In the second quarter Riggs lost $73 million due to drastic special reserves, restructuring costs, and writedowns designed to end asset-quality woes.
In the third quarter the bank eked out a $2.9 million profit, or 10 cents per share. But nonperforming assets were $271 million, down $37.7 million from the previous quarter.
"The real bet here is a bet on Paul Homan, and the continuing turnaround in the real estate market in Washington, D.C., which we think are reasonable," said Mr. Marinac, who predicts Riggs will earn 50 cents per share next year, and $1 per share in 1995.
