Hibernia Corp. hopes to raise about $80 million in an upcoming rights offering to shareholders, according to a filing with the Securities and Exchange Commission.
The proposed offering is the final part of Hibernia's plan to raise capital ratios at its main bank unit to levels required under an agreement with the Office of the Comptroller of the Currency, said Robert Close, treasurer of the New Orleans-based banking company.
"Our goal is to complete the recapitalization so that capital is not the issue going forward - so we can go back to the business of banking and leverage the existing franchise," he said.
Big Losses in Real Estate
Capital levels fell below regulatory minimums after the company suffered $186 million in losses from 1990 through the first half of this year. Troubles in its commercial real estate portfolio and loans to highly leveraged companies were the main culprits.
Under the agreement with the OCC, Hibernia needs to raise the leverage ratio of its Hibernia National Bank subsidiary from 3.65% at the end of June 1992, to 5.5% at the end of this year, and 6.5% at the end of next year.
Going the Same Route
Hibernia joins a number of weak banking companies that have looked to rights offerings to raise capital.
Equimark Corp. of Pittsburgh was the most successful so far, raising $52 million this year before it agreed to be purchased by Integra Financial Copr., also of Pittsburgh.
Last week, Constellation Bancorp, Elizabeth, N.J., announced plans for a rights offering, and Independent Bank Corp. of Rockland, Mass., Monday filed with the SEC to raise about $20 million through a rights offering.
In rights offerings, shareholders are given the chance to buy additional shares at a discount.
Hibernia plans to offer each of its shareholders the right to purchase 0.7 of a new share, according to its filing with the SEC, though bank officials said the ratio may change.
Discount Could Be 30%
The bank registered to sell as many as 21 million shares, using Dillon, Read & Co. as dealer/manager. The expected discount could not be determined, but one source said it could be 20% to 30% of Hibernia's stock price.
As a whole, Hibernia's recapitalization will be highly dilutive to holders of its 28.3 million shares. The bank earlier this year agreed with creditors led by Chase Manhattan Bank to convert debt into about $60 million in convertible preferred stock, and warrants for 1.8 million more shares of common stock.
The preferred stock is convertible into 21.8 million shares of common stock.
Possible Sale to Comerica
In addition, Hibernia this year agreed to sell its $923 million-asset Hibernia National Bank of Texas to Comerica for $63.1 million in cash. Neither transaction has been completed, and Hibernia will ask stockholders to approve the agreement with creditors Wednesday at its shareholders meeting.
Hibernia, with $4.5 billion in assets, lost $9 million in the six months ended June 30.
Nonperforming assets have declined from $319 million at the end of last year to $255 million at the end of June.
Pricing and terms of the company's rights offering will be set after the bank's registration has been approved by the SEC, Mr. Close said.