Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 13, 1993 TAG: 9307130045
SECTION: BUSINESS PAGE: B5 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
The new offer forced down the price of the Bristol-based thrift's stock as the market reacted to dilution of the company's stock.
Charter said it plans to issue 21.8 million new shares, with 5.95 "rights" to buy offered to existing shareholders for each of their shares.
The company reported at the end of 1992 that 3.7 million shares of its common stock were outstanding.
Investors who held Charter stock last Friday will receive the rights to buy the new shares.
The existing shares, which had been trading at about $3.50 each, dropped Monday to a range of $2.12 1/2 to $2.37 1/2.
Tyler Pugh, manager of the Roanoke office of Wheat First Securities, said that didn't represent a judgment by the market about the terms of the offer.
Rather, he said, it reflects the dilution of Charter's stock by the new shares. The market, he said, would react the same way to a stock split, for instance.
Each "right" is an opportunity to buy a share of Charter Federal stock for $2.
Pugh said he advised Charter Federal stockholders against doing nothing.
The course of action, he said, depends on whether an investor wants to own shares of Charter.
Shareholders who want to maintain their relative position in the thrift's stock should exercise the rights and buy the shares, he said. Unless they do this, their proportionate share of Charter stock would be diluted.
But the rights themselves have value - the difference between the $2 price for buying and the $2.25 average at which the stock was trading Monday.
The rights were trading Monday in the NASDAQ market for small-capitalization stock.
The offer for the new shares will expire Aug. 6 unless extended to Aug. 31. Charter Federal said the offering is conditioned on sale of at least 20.65 million shares.
The company said two large shareholders, each of whom owns more than 5 percent of its outstanding stock, along with directors, institutional investors and other large investors, will act as stand-by purchasers.
Charter Federal said the commitment will satisfy the conditions of the sale by the proposed closing date.
The thrift has said it will use the money raised by the stock sale to reach minimum government standards for capital investment.
Charter fell below those standards when, through an accounting treatment, it wrote off "goodwill" received for taking over several failed thrifts. The thrift lost a court case aimed at keeping that accounting method.
The company operates 26 offices in the Roanoke Valley, southwest Virginia and northeast Tennessee.
by CNB