PNC Financial putting pieces in place to exit TARP

PNC Financial Services Group, Inc. is moving swiftly to raise new capital after reaching agreement with regulators and the Treasury Department on a plan to repay the $7.6 billion it received through the Troubled Asset Relief Program.

PNC has announced plans for a $3 million offering of common stock and a $2 billion offering of senior notes. It also has agreed to sell its global investment-servicing unit to Bank of New York Mellon.  

James E. Rohr, PNC's chairman and chief executive, said that an improving economy and a steadying financial system make this "an appropriate time for us to redeem the preferred shares held by the U.S. Treasury."

PNC does not plan to redeem the accompanying warrant it issued the government when it got the TARP money, which was partly intended to aid its government-orchestrated acquisition of National City Bank.

That warrant gives the government the right to buy about 16.9 million shares of PNC's common stock at an exercise price of $67.33 per share, until December 31, 2018. The company's stock closed Wednesday at $53.71.

PNC announced on Tuesday that it had received approval for its exit from TARP, with $3 billion share sale representing the biggest piece of that plan. On Wednesday, it said the offering would be comprised of 55.6 million shares of common stock at $54 per share. It said the closing was expected to occur on about February 8, 2010.     

As part of the exit plan, the company also agreed to sell its PNC Global Investment Servicing unit, which provides fund-processing products and other services to money managers, broker-dealers and other customers.

Bank of New York Mellon agreed to buy that business for $2.31 billion.  The transaction is currently slated to close some time in the third quarter.

PNC filed plans with the Securities and Exchange Commission today for the sale of $2 billion in senior notes, with half paying a 3.625 percent interest rate and half paying 5.125 percent.

The company said the note sale would provide additional liquidity after the TARP shares are redeemed, probably later this month.

If that redemption is completed, PNC would become the eighth bank among the 10 largest TARP recipients to cash out of the program by repaying all of the government money.

Citigroup Inc., which got $45 billion through TARP, and SunTrust Banks Inc., which got $4.9 billion, also have yet to redeem all of their preferred shares.