Cadence Financial has completed the sale of $44 million of preferred stock to the U.S. Treasury Department under the capital purchase programme.
The company issued senior preferred shares to the U.S. Treasury that pay a cumulative annual dividend rate of 5% for the first five years and will reset to a dividend rate of 9% after five years if not redeemed by Cadence prior to that time.
In conjunction with the issuance of its senior preferred shares, Cadence issued the U.S. Treasury a warrant to purchase common stock of the company up to a maximum of 15% of the senior preferred amount or $6.6 million.
Lewis Mallory, Jr., chairman and CEO of Cadence Financial, said: The $44 million preferred stock sale will further strengthen Cadence’s already solid capital base. Assuming the new capital had been received and invested as of September 30, 2008, in Federal Funds sold, Cadence’s tier one risk-based capital ratio would have increased to 13.08% from 10.16% and its total risk-based capital ratio to 14.31% from 11.40%, on a pro forma basis.
The U.S. Treasury recently created the capital purchase programme (CPP) which is part of the troubled assets relief programme to encourage qualifying U.S. financial institutions to increase the flow of financing to businesses and consumers, thereby restoring liquidity and stability to the U.S. financial system. Companies participating in the programme must adopt the Treasury Department’s standards for executive compensation and corporate governance, for the period during which Treasury holds equity issued under this programme. These standards generally apply to the chief executive officer, chief financial officer and the next three most highly compensated executive officers. The approval is subject to certain conditions and the execution of definitive agreements.
