Heritage Oaks Bancorp to Raise $60 Million Through Private Placement

Heritage Oaks Bancorp to Raise $60 Million Through Private Placement

  • Posted: 03/10/2010
  • Castle Creek

PASO ROBLES, Calif.–(GLOBE NEWSWIRE)–Heritage Oaks Bancorp, (Nasdaq:HEOP) (“Company”), the holding company of Heritage Oaks Bank (the “Bank”), today announced that it has entered into securities purchase agreements with select accredited investors, including board members (“Investors”), pursuant to which it expects to raise aggregate gross proceeds of $60 million. The proceeds will be used for working capital, augmenting the balance sheet and for general corporate purposes, including increasing the capital of the Bank. The Company presently expects the transaction to close on Friday, March 12, 2010.

The Company expects to issue, through a private placement in two separate closings, 56,160 shares of Series B Mandatorily Convertible Adjustable Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”) at a price of $1,000 per share (“Series B Share Price”) and 1,189,538 shares of Series C Convertible Perpetual Preferred Stock (“Series C Preferred Stock”) at a price of $3.25 per share (“Series C Share Price”). The initial closing will involve 52,088 shares of Series B Preferred Stock, and 1,189,538 shares of Series C Preferred Stock. The second closing will involve the issuance of the remaining 4,072 shares of Series B Preferred Stock as discussed below.

The conversion ratio for each share Series B Preferred Stock will be equal to the quotient obtained by dividing the Series B Share Price by the conversion price. Each share of Series B Preferred Stock will initially be convertible into 307.69 shares of common stock, based on the initial conversion price of $3.25 per share. The conversion price is subject to certain possible adjustments in the future under certain circumstances. The Series B Preferred Stock will automatically convert into shares of the Company’s common stock after the Company has received shareholder approval for the transactions, which is required both to increase the authorized shares of common stock available for issuance and under applicable NASDAQ listing rules. The Company has agreed to hold a meeting of Shareholders for this purpose on or before September 30, 2010.

The Series C Preferred Stock is a non-voting class of preferred stock substantially similar in priority to the common stock, except for a liquidation preference over the Company’s common stock. The Series C Preferred Stock will convert into common stock on a one for one basis only following receipt of necessary shareholder approval and if and when it is transferred to unaffiliated third parties by its initial owner.

Except for one Investor, no Investor will own more than 9.9% of the Company’s voting securities (or securities that convert into voting securities in the hands of such Investor), as calculated under the applicable regulations of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The one Investor that will own more than 9.9% is completing its investment through two separate closings. In the first closing, the Investor will purchase shares of Series B Preferred Stock resulting in its ownership of approximately 9.9% of the Company’s voting securities, and shall deposit in escrow $4,072,000 for the purchase of additional Series B Preferred Stock, pending receipt of the required regulatory approvals or non-objection to own more than 9.9% of the voting securities of the Company. If the Investor receives the required approvals or non-objection, the Investor will receive 4,072 additional shares of Series B Preferred Stock bringing its total ownership of the voting securities (or securities that convert into voting securities) of the Company to approximately 14.4%. If the Investor does not receive the required regulatory approvals, or an overly burdensome condition on any such approval is imposed, the Investor will have the option to instead purchase an equivalent dollar amount of Series C Preferred stock, which is the only other time the Series C Preferred Stock will be issued.

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