Citizens Republic considers exchange offers, convertible preferred offering to shore up capital

By Angela McDaniels

Tacoma, Wash., June 25 - Citizens Republic Bancorp, Inc. is exploring several initiatives to bolster capital and strengthen its balance sheet, according to a company news release.

The company said it is considering the following capital-raising initiatives:

• An offer to issue shares of common stock in exchange for its $125 million of 5.75% subordinated debentures due in 2013;

• An offer to issue shares in exchange for its $150 million of 7.5% trust preferred securities;

• One or more offerings of common stock or convertible preferred stock for cash; and

• An investment by the U.S. Treasury of up to $190 million under its Capital Assistance Program and up to an additional $100 million under the Capital Assistance Program that would be used to redeem a portion of the outstanding preferred stock issued to the Treasury in 2008.

The company said it believes that additional capital may be necessary to maintain and strengthen its balance sheet to withstand the effects of increased economic stress and uncertainty in the future. However, Citizens does not have a sufficient number of authorized but unissued shares available to raise that capital.

Citizens Republic will seek shareholder approval to increase the number of authorized shares of common stock to 1.05 billion from 150 million and to issue shares in exchange for the 5.75% debentures at a special meeting on Aug. 20.

Goodwill impairment charge

Citizens performed an interim goodwill impairment test during the second quarter and believes that the goodwill allocated to its Regional Banking reporting unit is impaired due to the continued deterioration in the credit quality of Citizens' loan portfolios and lower earnings due to the challenging economic conditions, according to the release.

As of Thursday, the company estimates that the non-cash goodwill impairment charge will be approximately $270 million during the second quarter.

Citizens Republic Bancorp is a financial services company based in Flint, Mich.

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