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First Niagara (FNFG) announces a $450M share placement, representing about 17% of the regional...

First Niagara (FNFG) announces a $450M share placement, representing about 17% of the regional bank's current market value, as the company looks to raise funds to buy branches of HSBC Holdings (HBC). Shares -4.5% AH.
Comments (5)
  • jMan1773
    , contributor
    Comments (23) | Send Message
     
    Raise funds to buy more branches of HBC or pay for branches bought earlier this year?
    6 Dec 2011, 07:45 PM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    from the release:
    >>First Niagara intends to use the net proceeds from this offering of common stock to consummate its previously announced acquisition of branches of HSBC Bank USA, National Association announced on July 31, 2011 and for general corporate purposes.<<

     

    Sounds as though they figured out they couldn't pay for the branches they'd already agreed to buy. So they're screwing their shareholders twice over with the stock issue and by cutting the dividend in half. Been nice if they had done the math *before* agreeing to the HBC purchase.

     

    Disclaimer: long FNFG but not for much longer
    7 Dec 2011, 05:30 AM Reply Like
  • jMan1773
    , contributor
    Comments (23) | Send Message
     
    Thank you David. I had a small position as well. It was worth it at over 7% and a good history. I'm not so sure now.
    7 Dec 2011, 06:32 AM Reply Like
  • davidingeorgia
    , contributor
    Comments (2713) | Send Message
     
    Yeah, same here...not a big position, thank goodness. I'm trying to decide if I should wait until I'm less ticked off to get rid of it or just be done with it. What bothers me more than either the stock offering or the dividend cut is the way that both were handled. I read nothing from FNFG about needing to do either of these things (much less both) when they first signed the deal to acquire the HBC branches. It still seems like a good deal for them, but I'm not sure I should trust what they say about that now either.
    7 Dec 2011, 07:47 AM Reply Like
  • jMan1773
    , contributor
    Comments (23) | Send Message
     
    I had the same initial reaction to sell, but then I started to think about it a little more and here is why:

     

    As of the close yesterday their yield was 7.1% with a pay out ratio of 91%. This will cut their yield to about 3.5% and payout ratio to 45%. Which is now a much safer level.

     

    If FNFG sells off hard and gets back down to its 52 week low of 8.22 the yield will be 3.9%.

     

    This HSBC acquisition is a very good buy and they will grow substantially from it. There are not many high potential growth stocks with 3.5% yields.

     

    I am waiting to see the reaction to the news and possibly add more to my position if their is a big drop. I don't see too much downside risk, but FNFG is definitely a long term prospect.
    7 Dec 2011, 09:09 AM Reply Like
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