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On Monday, TCF Financial Corporation ( TCB - Analyst Report ) offered 6 million depositary shares to general public at an offer price of $25 per depository share. Each share represents a 1/1,000th interest in a share of the company’s Series A Non-Cumulative Perpetual Preferred Stock. The Preferred stock has a par value of 1 cent per share.
The stock offering will inculcate gross proceeds of $150 million in total. Moreover, TCF Financial has also given an option to purchase an additional 0.9 million depositary shares to cover over-allotments, if any, to the underwriters. The additional shares will also be issued at $25, yielding gross proceeds of $22.5 million.
TCF Financial plans to close the transaction by June 25, 2012, subject to certain customary conditions.
Morgan Stanley & Co. LLC, a division of Morgan Stanley ( MS - Analyst Report ) and UBS Securities LLC, an indirect wholly-owned subsidiary of UBS AG ( UBS - Analyst Report ) , served as joint book-running managers for TCF Financial. Moreover, RBC Capital Markets, LLC and Stifel, Nicolaus & Company, Incorporated - a subsidiary of Stifel Financial Corporation ( SF - Snapshot Report ) - acted as co-managers.
TCF Financial also announced that quarterly dividends will be paid on these securities at an annual rate of 7.50%. The company declared that dividends, as and when declared by the Board of Directors on a non-cumulative basis, will be paid on March 1, June 1, September 1 and December 1 of each year. The first dividend will be paid on September 1, 2012.
The net proceeds from the offering are expected to be used for redeeming 10.75% Junior Subordinated Notes, Series I worth $115.01 million. This includes redemption of 10.75% Capital Securities, Series I (Trust Preferred Securities) worth $115.0 million and $10,000 worth of 10.75% Common Securities, Series I issued by TCF Capital I. Further, TCF Financial plans to use the remaining proceeds for general corporate purposes.
Moreover, redemption of Trust Preferred Securities would enable TCF Financial to lower the interest costs, as these securities demand higher rates compared to others. Moreover, according to Dodd-Frank Act, beginning 2013, banks will no longer be able to consider these securities as regulatory capital.
TCF Financial currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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