E*TRADE (ETFC) Announces $1.2B Capital Plan Including Equity Offering, Debt Exchange
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E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) announced the launch of a registered public offering of $400 million of its common stock. The Company also announced that, upon pricing of the Common Stock Offering, it will launch significant debt exchange transactions for certain of its outstanding notes.
Affiliates of Citadel Investment Group L.L.C., the Company's largest stock and bond holder, have agreed to participate in both the Common Stock Offering and the Exchange Transactions.
The proceeds from the Common Stock Offering will provide additional equity capital, primarily for E*TRADE Bank and secondarily for other corporate purposes. Citadel has committed to place an order with the underwriters to purchase either $50 million or $100 million of stock in the Common Stock Offering, depending on the public offering price.
The Company will offer to exchange more than $1 billion of newly-issued zero coupon convertible debt for all of its 8% Senior Notes due 2011 and a portion of its 12.5% Springing Lien Notes due 2017. This will significantly reduce the Company’s debt service burden by eliminating interest costs relating to those debt securities that are exchanged and lengthening the weighted-average maturity of its debt securities.
Citadel has agreed to participate in the Exchange Transactions for an aggregate principal amount of at least $800 million face value of the Company's long-term debt, including $200 million face value of the 2011 Notes and at least $600 million face value of the 2017 Notes, subject to reduction under certain circumstances.
In addition to approval by shareholders, the extent of Citadel’s participation in the Exchange Transactions is subject to approval from E*TRADE’s primary federal banking regulator, the Office of Thrift Supervision.
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