Societe Generale of France is expected to issue a hybrid security that previously failed to catch on with U.S. banks.

Later this month, in an $800 million deal, the company will be the first major foreign bank to issue a financial instrument structured akin to REIT- real estate investment trust-preferred shares.

The bank will launch its road show on Tuesday, sources said.

Issuing these securities will help the $340 billion-asset company raise regulatory capital cheaply.

Last fall Chase Manhattan Corp., CalFed Bancorp, a thrift since acquired by Nationwide, and Chevy Chase Bank, also a thrift, issued a similarly structured instrument.

The security, however, failed to catch on with other banks because of the reluctance of federal banking regulators to qualify it as Tier 1 capital.

Later, regulators opened the way for a similar, yet less complicated, financial structure called the capital security. Domestic banks flocked to market with these securities.

Yet Goldman Sachs & Co.-which is famous for engineering such securities and is leading the Societe Generale deal-hopes that the new REIT-style securities will become popular among Yankee banks-that is, domestic banks that issue in the U.S. capital market.

Tier 1 capital for French banks-particularly Societe Generale-has declined somewhat.

The securities are noncumulative preferred shares that have a 10-year step-up feature. They will be priced off the six-month London interbank offered rate plus 240 basis points. Market experts already are saying the security will price 120 basis points off U.S. 10-year securities.

One difference between this transaction and the U.S. deals is that Societe Generale has 100% control over the limited liability company that will hold the mortgage-backed securities, said investment bankers.

In the U.S. deals, the issuers controlled only 80% of the REIT.

The deal also does not incur leverage on the transaction.

However, Yankee bank bond analyst Ricardo J. Kleinbaum of PaineWebber Inc. said that there were some severe limitations to this security.

"If the bank's capital ratios fall below the regulatory minimum, investors could lose a portion of their principal," said Mr. Kleinbaum. "Nevertheless, I think that is unlikely."

The analyst added that Societe Generale's special-purpose vehicle will be offering a substantially higher yield relative to what it pays on its outstanding securities in the United States.

French regulators are eager to see the bank issue such a security. Societe Generale's Tier 1 capital ratio has ticked down as a result of recent acquisitions.

"European regulators would prefer banks to issue Tier 1 capital-a permanent form of funding-as opposed to subordinated debt, or step-up perpetuals," said Mr. Kleinbaum.

Market sources don't expect a flood of such securities to hit the market, but they do expect investors to show interest.

Merrill Lynch & Co. is said to be preparing a similar security for National Bank of Canada.

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