* Considering reverse stock split as part of capital plan
* To raise up to $25 mln from a rights issue
Dec 23 Capitol Bancorp Ltd CBC.N said it will
exchange its outstanding trust-preferred securities (TruPS) for
common shares and begin a rights issue as it looks to shore up
its capital position.
The Lansing, Michigan-based company also said it plans to
seek shareholder approval for a reverse stock split within a
range of 1-for-5 to 1-for-75 in an effort to lift its depressed
The TruPS exchange, with a liquidation value of about
$170.8 million, will wipe off a $16 million annual interest
expense, while the rights issue is expected to raise up to $25
million, the loss-making company said.
In a bid to conserve cash, the company has deferred its
interest payments on all TruPS since mid 2009, it said.
The company, which suffered losses from operations since
2007, has been plagued by significant increases in
nonperforming loans, foreclosed real estate and loan losses.
It has been under increased regulatory scrutiny and
enforcement action after erosion of its regulatory capital
In 2009, Capitol Bancorp entered an agreement with the
Federal Reserve Bank of Chicago, which requires the company to
improve its operating results.
Shares of the company closed at $0.45 on Wednesday on the
New York Stock Exchange. The stock has lost 78 percent in value
in the one year. (Reporting by Archana Shankar in Bangalore;
Editing by Jarshad Kakkrakandy)