1st Interstate Pledges Shot in Arm for Allied

First Interstate Bancorp would infuse $250 million into Allied Bancshares if its proposed acquisition of the Houston banking company is approved by Allied’s shareholders, the banking companies said Friday.

As previously reported, the cash injection is needed because Allied plans to spin off $250 million worth of its bad loans into a separate “liquidating bank,” thus reducing Allied’s net worth by that amount.

The $250-million infusion from First Interstate “replaces the loans being spun off,” said Jay C. Crager Jr., Allied’s executive vice president and chief financial officer.

Details about the infusion are disclosed in a proxy statement being mailed to Allied shareholders, who are being asked to vote on the sale to First Interstate at a special meeting Dec. 14.

In the proxy, First Interstate estimated its acquisition costs at $378 million, not including the $250-million infusion. A spokesman for First Interstate said the Los Angeles banking company raised the funds for the acquisition last spring by selling debt securities under a previously filed $4-billion shelf registration.

According to the proxy, the value of the transaction to Allied shareholders is $462.3 million, or $11.14 a share, somewhat higher than analysts’ initial estimates of $10 to $10.85 a share. Under the acquisition proposal, Allied shareholders would get a package of securities from First Intestate and a share in the “liquidating bank.”