Sovereign Bancorp, the thrift company that plans to acquire 278 branches from Fleet Financial Group and BankBoston Corp., is reaffirming that the cost will be $1.4 billion.
Jay Sidhu, Sovereign's president and chief executive officer, said in an interview Thursday that an article in Tuesday's American Banker, reporting that Sovereign had to raise $1.9 billion to complete the transaction with the merging New England banking companies, was incorrect.
The article was based on an interview with Jacquelyn Blue, Sovereign's treasurer. According to the reporter's notes, Ms. Blue said, "The total capital needed will be closer to $1.9 billion."
Mr. Sidhu said Ms. Blue was misinterpreted and that she said Sovereign might raise as much as $2 billion, not that it needed to. If the market reacts well to the $1.4 billion offering, the amount might be raised, he said.
On another issue that Mr. Sidhu was asked to clarify, Wyomissing, Pa.-based Sovereign has been saying that it has received a $1.4 billion bridge loan from Salomon Smith Barney, the investment banking arm of Citigroup Inc., and Lehman Brothers. Usually a bridge loan is short-term and the lenders already have lined up long-term investors to "take them out" of the credit.
Analysts have described the deal with Salomon and Lehman as a backup loan. Mr. Sidhu said Thursday that it was "backup financing," which Sovereign would not draw down unless it was unable to raise the money elsewhere.
The loan would have to be paid back in four years, he said. The arrangement assures Sovereign that it will have the money needed for the acquisition, Mr. Sidhu said. -- Robert A. Bennett