Old Second Bancorp (OSBC) in Aurora, Ill., is set to begin a stock offering that could help it dig out of a deep capital hole.
The $2 billion company plans to sell up to $70 million of common stock, it said in a regulatory filing Friday. It plans to use the money to buy back a third of its outstanding Troubled Asset Relief Program shares, pay the $12.3 million in accrued interest on those shares and pay off $15.7 million in unpaid interest on trust-preferred debt, it said.
Old Second did not say when the sale would begin or what the share price would be.
The company has reached an agreement with an investor to buy back 33% of its total outstanding Tarp shares at a slight discount to their face value, it said in the filing. Old Second received $73 million through the program in 2009, and the Treasury auctioned the shares last year for $24.7 million.
The interest rate on the company's remaining Tarp debt will rise to 9% from 5% next month, it said. The rate on Tarp shares increases five years after the shares' issuance.
Old Second has about $58.4 million in outstanding trust-preferred debt, along with the $15.7 million in compounded interest payments. Old Second stopped paying interest on the trust-preferred in 2010, it said.
Old Second has been slowly recovering after losses it suffered following the financial crisis that ate through its capital buffer. The bank had negative tangible common equity at the end of 2011 and 2012, but held $67.7 million as of Sept. 30.
Old Second's bank was freed from a regulatory order with the Office of the Comptroller of the Currency last October.