P.M. BRIEFING : Swap Could Boost Ailing Bank
Bank of New England Corp. could receive a major boost of about $600 million in capital if the troubled bank agrees to a debt-for-equity swap proposed today.
Committees representing holders of $705-million worth of Bank of New England bonds have agreed to exchange their bonds for stock that will give them 92% ownership of the company, said Wilber Ross, who represents some of the bondholders.
Under the deal, the debt would be reduced from $705 million to $100 million. The difference--$605 million--would be converted to equity capital for the bank.
“That’s a huge amount,” Ross said. “The bank severely needs capital.”
James Dorsey, a bank spokesman, said the bank would review the offer and discuss it with the board of directors.
If approved, the deal could put the ailing bank in compliance with a capital agreement it signed with federal banking regulators earlier this year.
Federal regulators ordered the bank to raise its capital-to-asset ratio to at least 3% from its current 1.1%.
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