Published: Tuesday, March 16, 2010 15:13 (GMT-0400)
By Jorge Porter / Business News Americas
Puerto Rico's Oriental Financial Group (NYSE: OFG) has priced a 7.6mn share offering at US$11.40 per share for gross proceeds of approximately US$86.6mn.
Oriental launched the offering on Monday (Mar 15), originally planning to raise US$50mn.
The price represents a discount of around 2% to the stock's closing price Monday.
In a press release, Oriental said it has granted the underwriters a 30-day option to purchase up to an additional 1.14mn shares to cover possible over-allotments.
"The deal was nicely oversubscribed - investors are obviously very confident in management's ability to grow the bank. They're being rewarded for prudently navigating through the four-plus year recession in Puerto Rico," Raymond James (NYSE: RJF) analyst Amanda Larsen told BNamericas.
Oriental said it intends to use proceeds from the issue for general corporate purposes, including possible participation in government-assisted transactions in Puerto Rico.
The capital is accretive to 4Q09 stated book value, Larsen said in an emailed statement. "We're excited about the prospects for the company as they look to expand their business, which we believe will come by way of a whole or partial FDIC-assisted deal."
There are several banks in Puerto Rico that are under regulatory cease-and-desist orders, largely due to asset quality deterioration and the resulting decline in capital ratios, with some of these institutions falling well below the regulatory definition of "well capitalized."
In a note, US research, trading and investment banking firm B Riley said it has assumed that the bulk of the proceeds from the offering will be redeployed into loans in 2Q10, providing some of the lift to earnings that an acquisition could add.
However, the additional shares added as a result of the offering would more than offset the additional net interest income under this scenario, B Riley said.
A government-assisted deal would likely provide greater benefits in the form of additional core deposits. B Riley said it is revising its 2010 and 2011 EPS estimates as a result of these changes to US$2.15 and US$2.64 from US$2.34 and US$2.94, respectively.
Oriental expects to close the sale of the common stock on March 19. Keefe, Bruyette & Woods is acting as sole book-running manager, and Oriental Financial Services Corp as co-manager.