Shares of New York Community Bancorp rebounded on Wednesday, March 6, after the troubled U.S. regional bank unveiled a capital increase of about $1 billion.
The US bank said it had agreed to a deal with several investment firms including Hudson Bay Capital, Reverence Capital Partners and former US Treasury Secretary Steven Mnuchin's Liberty Strategic Capital for more than $1 billion in exchange for shares in the bank.
The stock jumped sharply after the announcement, but trading remained volatile and was briefly halted, gaining about 30%.
Stocks gave up some of those gains when trading resumed, ending the day up more than 7% after several more pauses.
Under the announcement, four members of the bank’s board, including Mnuchin, will join. Investors will also receive shares in the bank at $2 per share, along with convertible preferred stock that could pay quarterly payments.
Prior to the announcement, the stock was down 42% amid reports from Reuters and the Wall Street Journal that NYCB was exploring a capital increase.
Since the beginning of this year, the stock has fallen by more than 80%.
The announced cash injection is the latest development at the bank, which has been in turmoil since the start of the year. In late January, it announced a significant increase in provisions for potential loan losses on its balance sheet.
Moody's also downgraded the bank's credit rating by four notches, to Ba3 from Baa2, putting it three levels below investment grade.
