Citizens exchanges $125 million of securities in offer for 7.5% trust preferreds, 5.75% notes

By Angela McDaniels

Tacoma, Wash., Sept. 28 - Citizens Republic Bancorp, Inc. received tenders for approximately $108 million of its $150 million of 5.75% subordinated notes due 2013 and about $17 million of the $125 million of 7.5% enhanced trust preferred securities issued by Citizens Funding Trust I, according to a company news release.

All of the tendered securities were accepted for exchange, and the settlement date is expected to be Sept. 30.

An exchange offer for the securities began July 31 and expired at 11:59 p.m. ET on Sept. 25. The deadline was extended from Sept. 14.

The company offered up to 500 million shares of newly issued common stock in exchange for the securities.

Holders will receive 1,355.8954 shares for each $1,000 principal amount of 5.75% notes tendered.

Investors will receive 30.5076 shares for each $25.00 liquidation amount of trust preferreds tendered by Aug. 13, the early tender premium deadline, and 28.8127 for each trust preferred tendered after that date.

The exchange ratios were determined by dividing the applicable value by the average volume-weighted average price of the company's stock during the five trading days that ended Sept. 25, which was $0.7375.

The applicable value was par for the notes, $22.50 for each trust preferred tendered by Aug. 13 and $21.25 for each trust preferred tendered after that time.

On Aug. 27, the company added a provision to the exchange offers that allowed participants to limit the percentage of shares they will own once the offer is completed.

For each holder who chose to exercise this cap, the company will return any tendered securities that would result in that holder owning more than 9.99% of the company's outstanding shares. For each holder, the amount of any trust preferreds tendered will be reduced before the amount of any notes tendered is reduced.

The exchange offers were subject to conditions that include the receipt of shareholder approval of an increase in the number of authorized shares of common stock to 1.05 billion from 150 million at a special meeting on Sept. 9. The issuance of shares in exchange for the notes was also subject to shareholder approval at the special meeting.

Citizens said the offers will raise $199 million of additional tier 1 common equity.

Morgan Stanley was the arranger and sole lead manager for the exchange offers. Morgan Stanley and Keefe, Bruyette & Woods, Inc. were the dealer managers.

D.F. King & Co., Inc. (800 714-3312 or, for banks and brokers, 212 269-5550) was the information and exchange agent.

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