PNC Prices Stock Offering at Slight Discount

PITTSBURGH (TheStreet) -- PNC Financial Services(PNC) priced 55.6 million shares of common stock at $54 a share on Wednesday in a public offering meant to bolster the financial institution's capital coffers as it seeks to repay bailout funds under the Troubled Asset Relief Program.

PNC expects to raise $3 billion through the stock sale. The proceeds will be used as part of its initiative to pay back $7.6 billion in bailout funds received under TARP in late 2008. The Pittsburgh-based bank said late Tuesday that it has reached an agreement with regulators to repurchase the funds.

The pricing reflects a 1.2% discount to the $54.65 closing price of PNC shares on Tuesday. The stock was down 35 cents, or 0.6%, to $54.30 in recent morning action.

In a statement released before the opening bell, the company said underwriters will have a 30-day option to purchase an additional 8.3 million common shares to cover over-allotments. It expects the deal to be completed by Monday.

PNC also plans to use the proceeds from the sale of its PNC Global Investment Servicing business, which Bank of New York Mellon(BK) is purchasing for $2.3 billion in cash, to repay TARP. In addition, it expects to issue between $1.5 billion and $2 billion worth of senior notes this month to provide additional liquidity in connection with the TARP redemption. The PNC-Bank of New York Mellon deal is expected to close in the third quarter.

PNC anticipates an after-tax gain of $500 million from the sale of the investment servicing business, formerly called PFPC. It will also increase its Tier-1 capital by approximately $1.6 billion after the release of $1.1 billion in capital related to goodwill and other intangible assets, it said.

The combination of the offering, TARP redemption and business sale is expected to boost PNC's Tier-1 common capital by approximately $4.3 billion and, based on Dec. 31 levels, bring the Tier-1 common capital ratio to 8% and Tier-1 risk-based capital ratio to 10.3%.