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Home Federal S&L; Plans $110-Million Debenture Offer

San Diego County Business Editor

Confirming weeks of rumors that it planned to raise capital, Home Federal Savings & Loan on Thursday said it would issue $110 million in subordinated convertible debentures.

Home Federal officials would not discuss what the proceeds would be used for, but analysts said the offering would leave the company in a good balance sheet position to expand.

“This looks like a good time (for them) to go to market,” said Alan Bortel, an analyst with Shearson Lehman Bros. in San Francisco. The proceeds, Bortel added, could be used to buy another company “if the right acquisition comes along.”

Several financial institutions have sought to strengthen their capital positions in recent weeks, during a time of falling interest rates and a robust stock market.

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“The terms available in the convertible debt market are extremely attractive for financial companies--especially ones like Home Federal,” which pays only 20 cents per year in common stock dividends, considered low by industry standards, according to Joseph A. Jolson, an analyst with Montgomery Securities.

“Any time you can raise additional capital at (favorable) terms, it behooves you to do so or you’d be penalizing your common shareholders,” he said.

The debentures will be due in 2011, according to an offering circular filed Thursday with the Federal Home Loan Bank Board.

The interest rate and conversion price of the debentures will be determined before a public sale, the company said. The underwritten offering also includes terms for an over-allotment option for an additional $16.5 million in debentures.

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As of Dec. 31, Home Federal’s assets totaled $10 billion and stockholders’ equity was $698.4 million, or 7% of total assets.

The company has “toyed with an offering for a long period of time,” Bortel said, adding that rumors of a pending debt offering had been circulating for a few weeks.


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