Bank of Boston Corp. began marketing $70 million of preferred stock on Tuesday and will sell $100 million of subordinated debt later this week.
Bank of Boston agreed to raise the capital in connection with its application to the Federal Reserve Board to acquire Multibank Financial Corp. of Dedham, Mass.
Three Fed governors abstained on the application because the offer to raise capital came when the application was being reviewed by the Board of Governors. Typically, such negotiations occur earlier in the process, at the staff level.
John Kahwaty, Bank of Boston's director of investor relations, said that the two offerings would boost Bank of Boston's total capital ratio to 12.3% from 11.8% in the first quarter.
The ratio was based on the combined balance sheets of Bank of Boston, Multibank, and Society for Savings. Bank of Boston is also buying Hartford, Conn.-based Society.
The cumulative preferred stock was being marketed at $25 a share, with a proposed dividend yield in the 7.875% area, capital markets sources said.
Merrill Lynch & Co. is lead underwriter for the preferred and subordinated offerings, both of which are expected to be priced on Thursday.
The shares are callable after five years, sources said.
Mr. Kahwaty said the company does not expect to pay a premium to raise the preferred or subordinated debt because of the debate within the Fed over approval of the Multibank purchase.
Bank of Boston debt has been steady since the Multibank application was approved on June 9. The yield spread over Treasuries of Bank of Boston subordinated debt tightened by one basis point that week, according to First Boston Corp.
Bank of Boston's preferred stock is rated BB-plus by Standard & Poor's Corp. and Baa2 by Moody's Investors Service.
