By Boris Ladwig, The Republic
bladwig@therepublic.com
Irwin Financial Corp. can proceed with its plan to raise $50 million. Shareholders on Monday approved a proposal that will allow IFC to issue more common shares.
The Columbus-based financial services corporation previously had said that it needed shareholders to approve the proposal to raise $50 million through a rights offering, a process that allows existing shareholders to purchase shares at a reduced price.
Cummins Inc. has agreed to invest up to $25 million in IFC if the corporation cannot raise $50 million through the stock offering.
Chairman and Chief Executive Officer Will Miller said Monday that due to SEC regulations, he could not comment on the shareholder vote.
Roughly 50 shareholders had gathered in the atrium at IFC headquarters on Washington Street to learn the voting results.
According to a proxy statement, IFC expects to issue about 20 million shares in the rights offering, but as of Oct. 6 had only about 7.1 million common shares available to be issued.
Shareholders on Monday agreed to allow IFC to increase the number of common shares it can issue from 40 million to 200 million.
In the second proposal, shareholders agreed to allow the corporation to issue more than 20 percent of its outstanding common shares, which will enable the corporation to offer certain parties the right to exchange their trust preferred securities for common shares at a yet-to-be-determined ratio.
The corporation said that the exchanges would improve the quality of its capital levels because it could result in capital that is classified as Tier 2 being reclassified as Tier 1. Regulators view Tier 1 capital as a more reliable indicator of a financial institution's health.
In the proxy statement, IFC had said that failure to approve either proposal could make it more difficult to raise capital and "could have a material adverse impact on our financial condition and could adversely affect the price of our common shares."
IFC, which employs just over 300 in Bartholomew County, has posted significant losses in the last few quarters, including a $107 million loss in the second quarter. IFC expects to announce third-quarter results next week.
Though the corporation expects to book more losses, particularly in this quarter, Miller has said he anticipates returning to profitability in 2009.
On Monday, shares fell 4 cents or 1.82 percent, closing at $2.16.