M&T Bank Corporation (MTB - Free Report) announced its decision to redeem all of its issued and outstanding 8.5% Enhanced Trust Preferred Securities (TruPS). Notably, the securities were issued by M&T Capital Trust IV. The redemption is scheduled on Feb 27, 2014.
Along with this, M&T Bank will redeem the entire junior subordinated debt securities held by the aforesaid trust. The present outstanding total principal amount in TruPS is $350 million.
Further, M&T Bank has fixed the price of redemption of the TruPS at $25.00 per unit that reflects 100% of the liquidation amount. The company will pay this redemption price along with any distribution outstanding and due on the securities up till the date of redemption to its shareholders.
The Bank of New York Mellon Corp. (BK - Free Report) is acting as the paying agent for the redemption process.
Recently, on Dec 30, 2013, Fifth Third Bancorp (FITB - Free Report) fully redeemed its outstanding 6.50% TruPS issued by Fifth Third Capital Trust IV.
TruPS redemption is viewed as an encouraging step for banks. It helps reducing the burden of interest expenses, as these securities demand higher rates than other securities and often the banks replace TruPS with equity or other low-cost debt. Further, according to the Dodd-Frank Act, banks are no longer allowed to consider these securities as regulatory capital beginning 2013.
M&T Bank carries a Zacks Rank #3 (Hold). Among major regional banks, Bank of America Corp. (BAC - Free Report) is worth considering with carrying a Zacks Rank #2 (Buy).