MW NYCB's stock and bonds rally as bank swaps preferred stock for common stock

By Steve Gelsi

Move removes the overhang of dividend payments for the preferred stock

New York Community Bancorp's stock and corporate bonds rallied on Tuesday, after the bank disclosed a conversion of preferred stock into common stock.

The move is generally viewed as positive because it frees issuers from paying steady dividends to preferred shareholders and potentially leaves more money left over to pay back debt or issue dividends to shareholders, according to market observers.

NYCB's stock $(NYCB)$ was up by 9.1% on Tuesday, while its sole traded bond, floating-rate notes that mature in April of 2026, also rose.

New York Community Bancorp on Monday inked three share exchange agreements with former Treasury Secretary Steven Mnuchin's private-equity firm Liberty Strategic Capital, as well as Hudson Bay Capital Management LP and Reverence Capital Partners LP.

The three firms had teamed up in May to provide $1 billion in capital to NYCB as it struggled with two problem loans and disclosed a surprise loss earlier this year.

Also read: NYCB raises more than $1 billion in equity investment led by former Treasury Secretary Steven Mnuchin's firm

Under the terms of the deal, Liberty Strategic Capital agreed to exchange 29,000 shares of Series B noncumulative convertible preferred stock for the issuance of 9.67 million shares of common stock with a value of about $100 million based on Tuesday's stock price of $10.34 a share.

Hudson Bay exchanged 22,500 shares of Series B Preferred Stock for just under 7.5 million shares of common stock valued at about $78 million.

Reverence Capita swapped 11,857 shares of Series B Preferred Stock for 3.95 million shares of common stock with a value about $41 million.

NYCB had been under obligation to pay a dividend of $10 per share per quarter for the Series B noncumulative convertible preferred stock.

NYCB's common stock has fallen 66.4% in 2024, compared to a 13.7% rise by the S&P 500 SPX.

After the debt exchange, Liberty Strategic Capital continued to hold 114,355 shares of Series B preferred stock, Hudson Bay held 14,350 shares of Series B preferred stock and Reverence held no shares of Series B preferred stock.

Also read: NYCB stock drops on steeper-than-expected losses on office and multifamily loans

-Steve Gelsi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

August 13, 2024 13:12 ET (17:12 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.