First Niagara to Raise $450 Million to Fund HSBC Purchase

First Niagara Financial Group Inc. Buffalo announced a series of moves after the stock market closed Tuesday aimed at raising the capital it needs to complete its acquisition of 195 upstate New York branches from rival HSBC Bank USA.

Most notably, the $31 billion-asset company said that it has launched public offering of its common stock in which it expects to raise $450 million. It is also offering its underwriters an option to buy an additional $33.75 million worth of stock.

First Niagara also said that it would cuts dividend in half, to eight cents, starting in the first quarter of 2012 in order to preserve capital after completing the roughly $1 billion deal for the HSBC branches. The dividend cut is expected to save the company $110 million in 2012.

Finally, First Niagara said it expects to offer an additional $350 million of perpetual noncumulative preferred stock and $300 million of subordinated notes in the near future. The company said that the offerings would be subject to market conditions.

First Niagara announced its deal for the HSBC branches in late July. The sale is expected to close in early 2012.

As a condition of the deal, the Justice Department has ordered First Niagara to divest 26 branches. First Niagara has also said that intends to close a or sell dozens of other HSBC branches that are outside of its desired markets.