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First Niagara to sell debt bonds <br> Will help to repay older, costlier debt

First Niagara Financial Group on Tuesday said it would sell $300 million in bonds through a public debt offering to raise cash for repaying older, more costly debt.

The Buffalo-based parent of First Niagara Bank filed a debt registration statement and prospectus with the Securities and Exchange Commission, offering the bonds priced at 6.75 percent interest for sale to investors. The senior, unsecured notes will be due March 19, 2020.

The offering had originally been planned at $250 million but was increased due to demand, the company said.

In its SEC filing, the company indicated that a portion of the net proceeds, after paying underwriting expenses and commissions, will be used to redeem $150 million in existing senior notes, which are due in September 2014.

Those notes, which pay 12 percent interest, were issued to PNC Financial Services Group's National City Bank as part of First Niagara's purchase last September of 57 Western Pennsylvania branches from National City. That purchase agreement allowed First Niagara to prepay the notes without penalty prior to maturity.

Proceeds will also be used to repay $50 million outstanding on a credit line from Fifth Third Bank of Ohio, which is due on March 29 and currently pays an average interest rate of 1.74 percent.

The remainder of the debt offering proceeds, as well as the original debts, will be for "general corporate purposes," according to the filing.

The offering is being underwritten by J.P. Morgan Chase & Co.'s J.P. Morgan Securities, Goldman Sachs Group and Janney Montgomery Scott LLC. Bank of New York Mellon Co. is the trustee for the bonds.

The debt issuance comes just two months after ratings agencies Moody's Corp. and Standard & Poor's assigned first-time credit ratings to First Niagara of "Baa1" and "BBB-," respectively. Together with a previous "BBB rating" from Fitch Ratings, that allowed First Niagara to go to the public debt market with investment-grade evaluations so it could borrow money at lower rates.

That also gave it an alternative to raising cash through issuing common stock, which dilutes existing shareholders. The bank already raised about $1 billion in three separate stock offerings last year.


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