New York, July 22 - Boston Private Financial Holdings, Inc. said it will sell $75 million of convertible preferred stock to Carlyle Group in a private placement.
The transaction is part of a plan to raise $185 million in new equity capital. The company will also offer $85 million of common stock in a public sale and cut its dividend to $0.01 per quarter, which will increase retained equity by $25 million over eight quarters.
The $75 million of convertible preferreds will be in two tranches, one mandatorily convertible and the other convertible only if shareholders approve.
The mandatory tranche will account for 9.99% of Boston Private's pro forma equity when converted. It will convert at a price of $5.52 per share following a shareholders' meeting planned for later in the year.
The conversion price was based on the average closing price of Boston Private common stock during the week of July 7.
The contingent tranche will, combined with the mandatory piece, bring the total to 19% of Boston Private's pro forma shares. It will also convert at $5.52.
Both preferreds will pass through dividends on the common stock on an as-converted basis.
If the shareholders' meeting is not held before the record date for the fourth quarter dividend, the mandatory convertibles will step up to 20%, accruing from Sept. 30.
If shareholders do not approve conversion of the contingent preferred stock, its dividend will step up to 14% from Sept. 30, then 15.5% after six months and then 20% after a further six months.
Carlyle will also receive two warrants for every five shares that would be issued on conversion. The warrants are exercisable for five years at $6.62, a 20% premium to Carlyle's stock purchase price.
If all the preferreds are converted and the warrants exercised, Carlyle will own 24.99% of Boston Private.
Carlyle cannot convert its non-voting preferred stock or exercise its warrants if as a result it would own more than 9.99% of the outstanding common stock and its investment will be subject to lock-up restrictions for 18 months.
John Morton, III will join Boston Private's board as Carlyle's representative and will be entitled to a seat as long as Carlyle owns at least 5% of Boston Private's outstanding shares.
Boston Private is a Boston-based financial services company.
| Issuer: | Boston Private Financial Holdings, Inc.
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| Issue: | Non-voting preferred stock
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| Amount: | $75 million
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| Dividends: | Passthrough of common stock dividends on as-converted basis
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| Warrants: | Two for every five shares issuable on conversion
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| Warrant term: | Five years
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| Warrant exercise price: | $6.62
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| Investor: | Carlyle Group
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| Announcement date: | July 22
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| Stock symbol: | Nasdaq: BPFH
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| Stock price: | $6.59 at close July 22
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| Mandatory tranche
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| Issue: | Mandatorily convertible preferreds
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| Conversion price: | $5.52
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| Conversion ratio: | For 9.99% of stock
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|
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| Contingent tranche
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| Issue: | Contingent convertible preferred stock
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| Conversion price: | $5.52
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| Conversion ratio: | For 9.01% of stock
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