State Bancorp (STBC) to Retire $10M in Subordinated Notes and Liquidating Higher-Risk Loans
State Bancorp, Inc. (NASDAQ: STBC), parent company of State Bank of Long Island, today announced two separate strategic actions that are each designed to aggressively position the Company for 2010 and beyond.
In the first initiative, the Company reported that it will retire its outstanding 8.25% subordinated notes with an aggregate principal balance of $10 million issued in 2006 and due to mature in 2013. In exchange for the subordinated debt and accrued interest, the Company will issue 1,656,600 shares of its common stock in a privately negotiated transaction with four major institutional investors at an effective price of $6.50 per share. This transaction will further bolster the Company's already strong capital position and remove expensive debt from the capitalization structure. The net effects of this exchange will be an increase in the Company's tangible common equity of $11 million and an $825,000 annual reduction in ongoing interest expense related to the retired subordinated notes. The investors participating in the exchange are Endicott Management Company, Sandler O'Neill Asset Management, PRB Investors, L.P., and funds affiliated with Northaven Management, Inc. The exchange is scheduled to close on or about December 1, 2009.
In the second initiative, the Company announced that it is in the final stages of liquidating certain non-performing and higher risk legacy loans, including a $20 million bulk loan sale closed on November 19, 2009 which resulted in a loss of $11 million. The bulk loan sale is part of a larger fourth quarter strategy of aggressively liquidating certain problem loans, which is expected to include additional bulk portfolio and individual loan sales, loan modifications or similar liquidation strategies. It is anticipated that the combined 2009 fourth quarter full impact of this troubled loan liquidation strategy (including the $20 million sale) will result in the disposition of approximately $55 million original principal balance loans and an expected aggregate pre-tax charge of approximately $17 million, thereby generating an operating loss for the quarter ending December 31, 2009. The Company further anticipates that this strategy will result in the final disposition of many of its most difficult loans including the majority of its non-performing loans which totaled $35 million at September 30, 2009. All of the transactions described above have been for cash.
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