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UPDATE 2-Thomas H Lee to invest $180 million in First BanCorp
May 31, 2011 / 1:04 PM / 6 years ago

UPDATE 2-Thomas H Lee to invest $180 million in First BanCorp

* THL to buy $180 mln of shares at $3.50 a share

* Investment at a 32 pct discount to stock’s closing price

* THL will eventually own a 25 pct stake in the bank

* First Bancorp to also conduct $35 mln rights issue

* First BanCorp shares down 7 percent (Adds details on rights offering, PE firms getting stakes in cash-strapped lenders)

BANGALORE, May 31 (Reuters) - Puerto Rico-based First BanCorp said private equity firm Thomas H Lee Partners agreed to invest $180 million and would eventually own a quarter of the company, making it the latest in a series of troubled banks to receive private equity infusions.

Capital-starved lenders such as United Community Banks , Pacific Capital Bancorp , Sterling Financial , BankUnited and others have been bailed out by private equity when traditional sources of funding dried up.

Though U.S. bank regulators have crafted tough rules governing private equity firms buying failed banks, firms like Corsair Capital, Oak Hill Capital Partners, Warburg Pincus, Thomas H Lee, Carlyle can sidestep those rules by taking stakes in the banks before they fail. [ID:nSGE64D0K5]

Thomas H Lee will buy shares of First BanCorp, the holding company for FirstBank, for $3.50 per share, a 32 percent discount to their closing price on Friday.

The private equity firm will own a quarter of the bank, after taking into account the conversion of the U.S. Treasury’s $425 million preferred shares into common stock.

The lender said the transaction is contingent on it selling a minimum of $500 million, but no more than $550 million of common stock, including Thomas H Lee’s $180 million investment.

In June last year, First BanCorp said it would raise $500 million in equity after banking regulators asked it to boost its capital ratios. [ID:nSGE6530GG]

In January, First Bancorp implemented a one-for-15 reverse stock split to boost its share price, which were trading at under a dollar, and made it more attractive to investors looking to invest in the company. [ID:nSGE7040C0]

The bank will also begin a $35 million rights offering, giving existing shareholders the rights to purchase common stock at $3.50 per share.

The $35 million raised through the rights offering would count towards the $500-$550 million capital raise.

First BanCorp has been battered by a decline in value of residential and commercial real estate properties in Florida and Puerto Rico in the wake of the financial crisis.

The deal gives Thomas H Lee the right to a seat on First BanCorp’s board.

Shares of First BanCorp were down 7 percent at $4.78 in early trade on Tuesday on the New York Stock Exchange. (Reporting by Jochelle Mendonca in Bangalore; Editing by Maju Samuel)

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