JPMorgan may gain $1.3 bln from tender-CreditSights

NEW YORK Aug 5 (Reuters) - JPMorgan (JPM.N) may book a gain of as much as $1.3 billion if investors take the firm up on its offer to buy back up to $3.4 billion in trust preferred securities, analysts at CreditSights said on Wednesday.

JPMorgan on Tuesday offered to buy back up to $3.4 billion in trust preferreds, or TruPS, offering 60 percent of the par value for some issues and 63 percent of the par value of other bonds.

If all bondholders agree to the tender offer, JPMorgan could book earnings of around $840 million after tax, or $0.21 per share, analysts David Hendler, Pri de Silva and Kristine Lanspa said in a report.

"We are of the view that the company may have offered the tender to opportunistically improve the quality of its capital in light of continued credit losses and also rescue its investors who are earning around 1 percent on their floating rate TruPS," they said.

"JPMorgan indicated to us that the trust preferreds that the company tendered for are largely less liquid-to-illiquid, privately held capital instruments. As a result, investors have limited options to exit their investments," they said.

JPMorgan is the only bank deemed by the U.S. Treasury to have adequate capital to tender for its junior debt, CreditSights said.

Trust preferreds sit below senior debt but above common equity in a company's capital structure.

"The tender offer provides an opportunity for the company to improve the quality of its regulatory capital at the expense of quantity," CreditSights said. "We believe that most investors would have a strong incentive to accept the tender offer and reinvest their proceeds elsewhere." (Reporting by Karen Brettell; Editing by Dan Grebler)