UCFC Seeks to Raise $47 Million in New Capital
YOUNGSTOWN, Ohio – United Community Financial Corp., holding company of the Home Savings and Loan Co., announced Tuesday it seeks to raise some $47 million in capital through a private offering and a rights offering.
It must first obtain the approval of the Federal Reserve System, then its shareholders, before it can issue stock to raise the capital, chief financial officer James R. Reske said. The company hopes to achieve its goals by the end of the first quarter.
Shareholders would meet to act on raising the capital in a special session, the date dependent on when the Fed acts.
“While we’re announcing it [the effort to raise additional capital] today,” Reske pointed out, “we’re not funding it today.”
UCFC entered into stock purchase agreements Jan. 11 to issue some $39.9 million in securities through a private offering to accredited investors and into subscription agreements to issue 2.1 million in common shares to UCFC directors, officers, consultants and affiliates, the company said.
“Promptly following the closing of the private offering,” UCFC said, “the company will commence a rights offering of approximately $5 million to existing shareholders at the same common share purchase price of $2.75 as paid by investors in the private offerings.”
UCFC said the shares the nonaffiliated investors as a group are purchasing in the private offering will represent 29% or so of its common shares outstanding -- this assumes the rights are fully subscribed. None of the new investors would own more than 4.9% of UCFC as a result of the offering.
In a prepared statement, the president and CEO of UCFC and Home Savings, Patrick W. Bevack, said, “This capital raise is the final step in the execution of our current capital plan, and it provides UCFC and Home Savings with the capital we need to grow our company and its businesses.”
UCFC would use most of the proceeds to strengthen Home Savings’ capital positions and the remainder for general corporate purposes, Bevack said. “Execution of this capital raise is the culmination of more than two years of hard work by the board and our management team, achieved with the help of our advisers and cooperation of our regulators,” Bevack added.
Under the terms of the stock purchase agreements, each nonaffiliated investor would receive a combination of common shares and “perpetually mandatorily convertible” preferred shares that total $39.9 million, composed of $18.1 million in common shares and $21.8 million in preferred shares.
The preferred shares will not pay dividends at first -- UCFC is under a consent order with regulators that forbid the payment of cash dividends – and if they are not converted to common shares before June 30, the semi-annual noncumulative cash dividends take effect and pay 12% annually.
The stock purchase agreements would require UCFC to conduct a rights offering of some $5 million to its existing shareholders at the same price of $2.75 per share the larger investors would pay in the private offering.
Shares of UCFC closed at $3.22 Tuesday, up 4 cents from Monday’s close, on a volume of 86,398. It has 32.9 million shares outstanding, 25% owned by institutional investors.
UCFC engaged Vorys, Sater, Seymour and Pease LLP as its legal counsel in the capital raise and Marty Adams Consulting LLC as a special adviser to the board and management.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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