Midwest Banc to price $110 million convertible perpetual preferreds

By Rebecca Melvin

New York, Sept. 16 - Midwest Banc Holdings Inc. plans to price $110 million of depositary shares, each representing 1/100th of a share of convertible perpetual preferred stock, to improve its equity capital structure, according to a news release.

There is an over-allotment option of $15 million, or 600,000 depositary shares.

The Securities and Exchange Commission-registered offering is being sold via joint bookrunners Friedman, Billings, Ramsey & Co. and Keefe, Bruyette & Woods, Inc. Co-managers are Howe Barnes and Fox-Pitt Kelton.

The preferred stock will automatically convert to common stock five business days after receiving shareholder approval to increase the number of authorized shares.

The deal was expected to close in the third quarter.

Midwest also said it has suspended the third-quarter common dividend. And during the third quarter it also plans to increase loan loss allowances to about 1.6% of loans as of Sept. 30 from 0.9% as of June 30.

The company also plans to write down a previously disclosed $67 million position in government-sponsored Fannie Mae and Freddie Mac preferred securities and recognize a goodwill impairment charge, currently anticipated to be $80 million.

Midwest "is extremely disappointed that the U.S. government has not honored its implied long-standing commitment to the Fannie and Freddie securities, according to the release.

"The decline in value in these government-sponsored securities has, among other things, negatively impacted Midwest's market capitalization," the release stated.

Successful completion of the convertible preferred offering would put Midwest Banc's total risk-based capital ratio at about 11.5%, among the highest of its Chicago peers, it said.

Melrose Park, Ill.-based Midwest Banc is a commercial bank with $3.7 billion in assets. It trades on the Nasdaq stock exchange under the ticker symbol "MBHI."

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