Dime Savings Bank of New York on Friday took a major step to freeing itself from strict regulatory oversight by issuing 100 million of preferred stock.
"This is the final step in getting us into full capital compliance," said Richard Terzian, Dime's chief financial officer.
Before the offering of the preferred shares, which arc exchangeable for senior debt, the only capital requirement that the thrift did not meet was a level of 10% total risk-adjusted capital. The Office of Thrift Supervision required the savings bank to reach that mark by yearend 1994.
The issue will qualify as Tier I capital and pushes the thrift's total risk-adjusted capital ratio to 10.91% from 9.29% at June 30. In addition, the leverage capital ratio has risen to 6.62%, from 5.53%.
|Hope to Be Freed Up'
"As a result of this offering, we hope to be freed up from anything other
than normal regulatory supervision," he said.
Besides the capital requirements, the thrift has other operational standards from regulators to fulfill. Mr. Terzian does not expect those to be an obstacle to lifting the regulatory agreements.
Regulators have already given Dime more leeway in running its operations. The thrift, which had $8.2 billion of assets at June 30, will be allowed to increase in size to $9.2 billion, Mr. Terzian said.
Soaring losses from residential mortgage lending had staggered Dime. Its most important step toward reaching capital adequacy was a $189 million rights offering in May. said Mr. Terzian. The offering brought in far more than the original $125 million goal of management. he said.
Friday's noncumulative preferred stock offering carries a 10.5% dividend, reflecting the thrift's low-junk-grade rating. The issue is rated B3 by Moody's Investor Service and by Standard & Poor's Corp.
If Dime forms a holding company, it can choose to offer to the preferred-stock holders senior debt of the holding company that is due in 2005 with the same 10.5% yield, said Mr. Terzian.
Preferred holders who do not swap the debt will have the yield of their stock reduced to 8%, he said.
"This issue was sold to people who normally buy below-investment-grade bonds, with the understanding that they are probably going to end up owning bonds." he said.
If the thrift creates a holding company it would like to exchange the preferred stock for debt. because the debt would be less costly to the thrift, due to the tax deductibility of interest payments, he said. Stock dividends are not tax deductible.
Dime would invest the senior debt from the holding company into equity of the thrift, thereby maintaining the thrift's capital levels, he said.
"We pretty much think we will form a holding company in the near future," said Mr. Terzian.
Merrill Lynch & Co. was the lead manager of the exchangeable preferred stock issue, which will settle on Sept. 30.
Elsewhere in the capital markets. sources said another thrift, Greater New York Savings Bank may also tap the capital markets in the near future to raise Tier I capital.
A $250 million issue of Comerica Inc. bank notes, due Sept. 30, 1994, was priced at par to yield 3.375%.
The issue is rated A1 by Moody's and A by Standard & Poor's Morgan Stanley & Co. was lead manager.