Hampton Roads Bankshares has entered into definitive agreements with affiliates of The Carlyle Group and Anchorage Advisors to purchase at least USD73m in common stock each as part of an expected aggregate USD255m capital raise by the company from institutional investors.
Hampton Roads also plans to conduct a USD20m rights offering after the closing of the capital raise that will allow existing shareholders to purchase common shares at the same purchase price per share as the investors.
Any portion of the rights offering not purchased by existing shareholders will be purchased by the investors.
The investment and related transactions, which were unanimously approved by Hampton Roads’ board of directors, are subject to regulatory and shareholder approval and other conditions.
The company, which operates 60 banking offices in Virginia, North Carolina and Maryland, plans to use the proceeds of the investment and the rights offering to make capital contributions to and strengthen the balance sheets of its subsidiary banks and for other general corporate purposes.
“The investment represents an important step forward for the company, our shareholders, employees and the communities we serve,” says John A.B. “Andy” Davies, Jr., Hampton Roads’ president and chief executive officer. “As a leading community bank in our regions, our goal is to serve and grow with our customers and communities for many years to come. The capital we are raising will substantially strengthen our balance sheet and provide a solid foundation for the future.”
“We are very impressed with the team assembled at Hampton Roads under the strong leadership of Andy Davies. We are delighted to be part of a transaction that will accelerate the bank’s recovery and position it to be a leader in its markets both in service and stability,” adds Randal Quarles, Carlyle managing director (pictured).
Total common shares to be issued in the capital raise, including shares to be issued in the rights offering, will represent 87.7 per cent of outstanding common stock, after giving effect to these share issuances and the exchange of all outstanding preferred shares into common stock.
Funds affiliated with Carlyle and Anchorage will each purchase approximately 168.8 million shares for an aggregate price of USD72,565,714. Each will own 23.1 per cent of the voting equity of Hampton Roads after giving effect to the transactions described above and assuming that the rights offering is fully subscribed by existing shareholders. The other investors are expected to purchase shares representing varying ownership interests of up to 9.9 per cent.
If existing shareholders subscribe to an aggregate amount of less than USD20m in the rights offering, the investors will purchase the unsubscribed shares on a pro rata basis. Under no circumstances will any investor’s ownership percentage exceed 24.9 per cent after giving effect to the transactions.
In addition to the capital raise and rights offering, subject to the completion of definitive documentation, the US Department of Treasury has indicated its intent to exchange each USD1,000 in par value of series C cumulative preferred stock it purchased from Hampton Roads in 2008 under the Capital Purchase Program into 581.4 shares of mandatorily convertible preferred stock.
After giving effect to the transactions and assuming the exchange of all outstanding preferred shares for common shares, Treasury will own 6.4 per cent of the voting equity of the company.