Santander begins exchange offer for dollar-denominated tier 1 hybrids

By Angela McDaniels

Tacoma, Wash., Aug. 25 - Banco Santander, SA and its subsidiary, Santander Financial Exchanges Ltd., have begun an exchange offer for six series of the group's dollar-denominated tier 1 hybrid securities, according to a bank news release.

The bank is offering cash and up to $1,286,200,000 of 10.5% non-cumulative series 10 guaranteed preferred securities and up to $800 million of 10.5% fixed-to-floating non-cumulative series 11 guaranteed preferred securities.

The series 10 preferreds have a par value of $25 each, and the series 11 preferreds have a par value of $1,000 each. Both are being issued by Santander Finance Preferred, SA Unipersonal.

Specifically, the bank is offering:

• $78 of series 10 preferreds and $12 in cash for every $100 liquidation preference of the group's $190 million 6.41% non-cumulative series 1 preferreds;

• $77 of series 10 preferreds and $13 in cash for every $100 liquidation preference of the group's $500 million 6.8% non-cumulative series 4 preferreds;

• $72 of series 10 preferreds and $13 in cash for every $100 liquidation preference of the group's $600 million 6.5% non-cumulative series 5 preferreds;

• $46 of series 10 preferreds and $9 in cash for every $100 liquidation preference of the group's $350 million floating-rate non-cumulative series 6 preferreds;

• $80 of series 10 preferreds and $10 in cash for every $100 liquidation preference of the $200 million 7.3% Sovereign depositary shares. Every $25 liquidation preference of these depositary shares represents a one one-thousandth interest a share of series C non-cumulative perpetual preferred stock;

• $800 of series 11 preferreds and $100 in cash for every $1,000 liquidation amount of the $1 billion 8.963% non-cumulative trust preferreds guaranteed by Abbey National plc.

The bank said the purpose of the exchange offers is to improve the efficiency of the group's capital structure and to strengthen its balance sheet.

Morgan Stanley & Co. Inc. is the dealer manager, and Acupay System LLC (212 422-1222 or 888 385-2663) is the exchange agent.

Banco Santander is a commercial and private bank based in Madrid.

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