Eager to bolster its capital ratios, Citizens Republic Bancorp Inc. in Flint, Mich., said Monday that it will more than triple the number of shares it has outstanding, as part of a deal to exchange subordinated debt and trust-preferred securities for common stock.

The $12.1 billion-asset company, which has been struggling with heavy loan losses, said the exchange would add $199 million of Tier 1 common equity.

It said 76% of the holders of its subordinated debt and trust preferreds agreed to become common shareholders under the tender offer that closed Friday. The debt had a 5.75% dividend, and the trust preferreds had a 7.5% dividend.

Despite the dilution — the company will issue 268 million new shares — Terry McEvoy, an analyst at Oppenheimer & Co. applauded the deal in a research note Monday. "We were pleased with the high participation rate of the exchanges as well as the improvement in the tangible common equity ratio," he wrote.

McEvoy estimated that this ratio would widen by 125 basis points from the second quarter, to 6.34%. Analysts generally consider anything below 5% worrisome, and the company had been close to falling below that threshold.

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