Rochester, NY 8/22/2009 7:36:19 AM
Popular, Inc. BPOP , US Treasury's Moves support Poplar’s exchange Effort
Popular, Inc.
U.S. Treasury Department's support of Popular Inc.'s quest to beef up its capital signals the government's interest in maintaining a strong lender in the troubled Puerto Rican economy. Popular wants to add $1.1 billion to common equity in case the financial crisis gets more dreadful.
But its attempt to beef up equity by converting privately held preferred stock and trust preferred securities into common stock initially failed to gain enough traction among trust preferred shareholders.
Last week, Popular announced that the Treasury Department would convert $935 million of Popular preferred stock it received through the Troubled Asset Relief Program, or TARP, into trust preferred securities. The Treasury's decision to adapt the chosen stock into trust preferred gives little economic incentive to private trust chosen holders to convert to common stock, but the government is adding a psychological encouragement: It appears to be assuring investors that the government has Poplar’s back, so to speak, encouraging investors to convert to common stock, several analysts said.
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