First Business Financial Services in Madison, Wis., is relying on a subordinated debt sale to foot the cash portion of its pending acquisition.

The $1.3 billion-asset First Business has issued $15 million in subordinated notes to three unnamed investors, according to a regulatory filing on Tuesday.

The company said it intends to use up to $13.5 million of the net proceeds as the cash payment for its previously announced $30.1 million acquisition of Aslin Group and its Alterra Bank unit, which is expected to close later this year. It will use the remainder "to increase its regulatory capital and for general corporate purposes."

The fixed-to-floating rate notes are due on Sept. 1, 2024. The notes feature an annual fixed rate interest of 6.5% for the first five years after which the interest rate will reset on a quarterly basis, according to the filing.

Starting on Sept. 1, 2019 the company may "redeem the notes, in whole or in part" at the principal amount of the notes, plus accrued interest.

Sandler O'Neill acted as placement agent in the debt raise.

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