1st Mariner's Hale to exchange trust preferred securities for stock

February 04, 2010|By Gus G. Sentementes | gus.sentementes@baltsun.com

The troubled parent company of 1st Mariner Bank said a deal with its top executive will help boost capital levels and put the bank on firmer footing through a financial maneuver that will eliminate $20 million worth of debt.

Edwin F. Hale Sr., chairman and chief executive officer of First Mariner Bancorp, agreed to exchange $20 million in trust preferred securities for $2 million in common stock, plus warrants to purchase shares equal to 20 percent of the exchange, the company announced late Wednesday.

Essentially, Hale paid $2 million for the debt in exchange for stock, with the net effect being that stockholders' equity is expected to increase by $12.8 million, according to the company. "This transaction substantially helps the capital level of the holding bank," said Mark Keidel, chief operating officer.

The agreement, which requires shareholder approval, is part of 1st Mariner's months-long effort to satisfy regulators by raising capital and dealing with bad housing loans. Since falling under scrutiny last year, 1st Mariner has sold a consumer finance division for $10.5 million and said it intends to offer shareholders the right to buy additional stock as a way to raise $20 million.

"We are still moving forward with the rights offering," Keidel said.

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