MNC Financial Inc. said yesterday it closed the public sale of its credit-card unit for more than $1.1 billion and immediately used part of the proceeds to repay a $271 million loan it received from its banking subsidiaries, Maryland National Bank and American Security Bank.
The Baltimore-based banking company also said that the number of shares sold in MBNA Corp., the fourth-largest issuer of credit cards in the nation, was increased to 49.5 million shares from the originally planned 45 million shares in response to strong market demand.
The stock, which was initially sold to the public for $22.50 a share Jan. 22, closed on the New York Stock Exchange at $23.50 yesterday, down 62.5 cents a share.
Though the sale of MBNA was labeled a success a week ago, yesterday's announcement by MNC put the final touches on a crucial piece of the company's financing plan.
MNC announced last Tuesday that it had received commitments from underwriters for all of the newly issued stock in MBNA but that the sale would not close -- and the money would not change hands -- for a week.
Now that MNC has received the nearly $730 million it collected from the sale, the banking company is guaranteed the funds necessary to repay hundreds of millions of dollars in debt that is due in coming months.
The $271 million that MNC repaid its banking units was borrowed two weeks ago to pay debt the company owed to note-holders by Jan. 15.
The loans from its banks were originally due to be repaid Feb. 4.
In addition to those bank loans, MNC said yesterday that it would use its proceeds to pay additional note-holders $275 million Feb. 5 and $107 million between March and November. A portion of the remaining funds collected by MNC will be placed in Maryland National Bank to bolster that subsidiary's capital, the company said.
The MBNA sale was structured so that MBNA received funds from the sale of 15.12 million shares, and MNC received the proceeds from the remaining 34.38 million shares. The sale price of $22.50 a share was discounted by $1.27 a share to pay underwriter fees, legal and other expenses.
MBNA has said it will use its share of the proceeds to help meet regulatory capital requirements.
Alfred Lerner, who has received federal regulatory approval to serve as chairman of both MNC and MBNA, purchased 10 percent of the newly issued stock. Progressive Corp., a Cleveland-based insurance company of which he is also chairman, bought 4.9 percent of MBNA's stock. Mr. Lerner, who controls 8.8 percent of MNC's stock, is also that company's largest shareholder.