Midwest Banc offers stock in exchange for convertible preferreds

By Angela McDaniels

Tacoma, Wash., Dec. 3 - Midwest Banc Holdings, Inc. has begun an exchange offer for the depositary shares representing its series A non-cumulative redeemable convertible perpetual preferred stock, according to a company news release.

Each depositary share has a liquidation amount of $25.00 and represents one one-hundredth of a preferred.

For each depositary share exchanged, the company will issue a number of shares of its common stock with a value of $2.80.

The exact number of shares to be issued will depend on the "relevant price," which will be the greater of $0.28 and the average volume-weighted average price of the company's common stock during the five consecutive trading days ending on Jan. 11. Because the relevant price is subject to a minimum of $0.28, the maximum number of shares the company may issue per depositary share is 10.

The company said that depending on the trading price of its stock compared to the relevant price, the market value of the stock issued in exchange for each depositary share may be less than, equal to or greater than the $2.80 value referred to above.

Midwest Banc is not offering any consideration for undeclared dividends on the depositary shares.

The exchange offer will expire at 5 p.m. ET on Jan. 13.

Consent solicitation

The company is also seeking approval to amend the certificate of designation of the preferreds. It plans to file a definitive proxy statement with the Securities and Exchange Commission that updates a preliminary version previously filed with the SEC.

According to the preliminary filing, Midwest plans to seek approval to eliminate the requirements that:

• Full dividends must have been paid on the preferreds before the company can pay dividends on its common stock or any other securities junior to the preferreds;

• If full dividends are not paid in full on the preferreds, dividends on all series of stock ranking equally with the preferreds must be declared on a proportional basis;

• A series of preferred stock ranking equally with the preferreds cannot be issued without the approval of holders of the depositary shares if the new series will have cumulative dividends; and

• No dividends will be paid or declared on any particular series of preferred stock unless dividends are paid or declared pro rata on all shares of outstanding preferred stock that rank equally as far as dividends.

The amendments would also eliminate the right of holders of depositary shares to elect two directors if dividends have not been paid for six quarterly dividend periods.

Finally, the company is also seeking approval to issue a senior class of convertible preferred stock to the U.S. Treasury in exchange for the existing $84.78 million of series T fixed-rate cumulative perpetual preferred stock it holds.

Holders who tender must consent to the changes.

The record date for holders of the depositary shares entitled to vote on the changes is Nov. 27.

Capital plan

Midwest said the exchange offer is part of its larger capital plan designed to increase its common equity capital so that it can withstand continued and potentially more adverse economic conditions and credit scenarios.

The other elements of the capital plan include negotiating with the company's primary lender to restructure $55 million of senior debt and $15 million of subordinated debt, selling common and/or convertible preferred stock in one or more private or public offerings and asking the U.S. Treasury to exchange the series T preferreds for a new series of convertible preferred stock that would later be converted into common stock.

"In October, we announced that we had entered into a forbearance agreement with our lender through March 31, 2010. We believe that the forbearance agreement will provide our company sufficient time to complete all major elements of the capital plan," chief executive officer Roberto R. Herencia said in the release.

"In addition, we have been in advanced discussions with the U.S. Treasury regarding the terms of a proposed transaction pursuant to which the U.S. Treasury would exchange outstanding shares of our series T preferred stock. Although the U.S. Treasury has delivered to us a letter expressing its willingness to consent to such a transaction, the definitive terms of such a transaction with the U.S. Treasury have not yet been finalized.

"Finally, we have received non-binding indications of interest from potential investors to invest additional equity capital in our company, in each case up to $190 million or more. The success of each of these components and the overall capital plan is highly dependent on the success of the series A exchange."

Illinois Stock Transfer Co. (800 757-5755) is the exchange agent, and Morrow & Co., LLC (800 483-1314 or, for banks and brokerage firms, 203 658-9400) is the information agent.

Melrose Park, Ill.-based Midwest Banc is the holding company for Midwest Bank and Trust Co.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.