CHARLOTTE, N.C., Aug. 15 /PRNewswire-FirstCall/ -- Wachovia Corporation
announced today that it has reached an agreement in principle for a global
settlement with the Missouri Secretary of State (as the lead State in the
North American Securities Administrators Association task force
investigating the marketing and sale of auction rate securities, or ARS),
the Attorney General for the State of New York and the Securities and
Exchange Commission regarding ARS. Wachovia is pleased that the settlement
produces a liquidity solution for its clients who purchased ARS at
Wachovia.
"We understand that unprecedented market conditions have created
difficulties for our clients, particularly those holding auction rate
securities," said Robert K. Steel, president and chief executive officer of
Wachovia Corporation. "We are pleased to announce a comprehensive solution
for the liquidity needs of clients who purchased auction rate securities at
Wachovia and to resolve this matter with federal and state regulators."
Daniel J. Ludeman, president and chief executive officer of Wachovia
Securities, LLC, said, "Since this issue arose in February when auctions
first started to fail, we have played a leading role in encouraging ARS
issuers to restore liquidity to all of our clients, including those who
have become part of our firm through the Oct. 1, 2007, merger of A.G.
Edwards and Wachovia Securities. The dollar value of ARS held by Wachovia
Securities clients has been cut by more than 50 percent through redemptions
and successful auctions. Today's agreement in principle underscores our
desire to ensure that clients who purchased ARS at Wachovia receive the
liquidity they need."
Terms of the agreement in principle include the following:
-- Wachovia will offer to purchase at par ARS held by all individuals,
charities and religious organizations, as well as ARS held by small and
medium-sized businesses with account values and household values of $10
million or less, that were purchased at Wachovia on or before Feb. 13,
2008. These purchases will commence no later than November 10, 2008, and
conclude no later than Nov. 28, 2008, for clients who accept this offer.
ARS that are the subject of functioning auctions will not be eligible for
purchase.
-- Wachovia will offer to purchase at par ARS held by all other clients
that were purchased at Wachovia on or before Feb. 13, 2008. These purchases
will commence no later than June 10, 2009, for clients who accept this
offer and conclude no later than June 30, 2009. ARS that are the subject of
functioning auctions will not be eligible for purchase.
-- Wachovia will also reimburse investors who can reasonably be
identified and who would have been covered by the offer but who sold their
ARS below par, between Feb. 13, 2008, and the date of entry of the
settlement, for the difference between par and the price at which the
investor sold the ARS. The reimbursement will be made by Nov. 28, 2008.
-- In addition to Wachovia's offer to purchase ARS from clients,
Wachovia will offer loans to affected clients in need of liquidity until
the ARS repurchases occur.
-- Wachovia will refund refinancing fees to municipal ARS issuers who
issued ARS in the initial primary market between Aug. 1, 2007, and Feb. 13,
2008, and refinanced those securities after Feb. 13, 2008.
-- Wachovia will pay a total fine of $50 million to the state
regulatory agencies, which will be distributed to the States as determined
by the North American Securities Administrators Association and the State
of New York.
-- Wachovia neither admits nor denies allegations of wrongdoing.
As previously disclosed in Wachovia's Second Quarter Report on Form
10-Q filed with the Securities and Exchange Commission on Aug. 11, 2008, in
connection with the expectation of a potential settlement of ARS matters,
Wachovia recorded a $500 million pre-tax increase to legal reserves,
including amounts reserved for estimated market valuation losses on
affected ARS, for the second quarter of 2008, based on estimates and
assumptions at the time of the filing. Based on the terms of today's
agreement in principle, the timing and currently estimated amounts of ARS
to be purchased in the offer, current market conditions, expected future
redemptions, and expected sales by Wachovia to third parties of a portion
of ARS to be purchased in the offer, Wachovia currently expects to record a
further $275 million pre-tax increase to legal reserves in the third
quarter of 2008. Wachovia also currently expects that its Tier 1 capital
ratio will decrease by approximately 8 basis points in the third quarter
2008, reflecting the additional increase in legal reserves and the capital
impact of the offers. Wachovia does not currently expect that the purchase
of ARS under the agreement in principle will have a material effect on
capital, liquidity or overall financial results through expected maturities
or redemptions of the ARS purchased, or alter Wachovia's previously
announced focus on improving its Tier 1 capital ratio.
Wachovia currently estimates that the par value of ARS currently
outstanding and eligible for purchase under the above offers totals
approximately $8.5 billion. Following the purchases of ARS by Wachovia
pursuant to the offers, and based on expected future redemptions and the
expected sales of ARS to third parties described above, Wachovia currently
estimates that the amount of ARS that it would hold on its balance sheet as
of June 30, 2009, would be approximately $3.1 billion.
About Wachovia
Wachovia Corporation (NYSE: WB) is one of the nation's largest
diversified financial services companies, with assets of $812.4 billion and
market capitalization of $33.5 billion at June 30, 2008. Wachovia provides
a broad range of retail banking and brokerage, asset and wealth management,
and corporate and investment banking products and services to customers
through 3,300 retail financial centers in 21 states from Connecticut to
Florida and west to Texas and California, and nationwide retail brokerage,
mortgage lending and auto finance businesses. Globally, clients are served
in selected corporate and institutional sectors and through more than 40
international offices. Our retail brokerage operations under the Wachovia
Securities brand name manage more than $1.1 trillion in client assets
through 14,600 financial advisors in 1,500 offices nationwide. Online
banking is available at wachovia.com; online brokerage products and
services at wachoviasec.com; and investment products and services at
evergreeninvestments.com.
Forward-Looking Statements
This news release contains various forward-looking statements. A
discussion of various factors that could cause Wachovia Corporation's
actual results to differ materially from those expressed in such
forward-looking statements is included in Wachovia's filings with the
Securities and Exchange Commission.
SOURCE Wachovia Corporation
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CONTACT:
Media, Christy Phillips-Brown,
+1-704-383-8178, Justin Gioia, +1-314-955-2379, Investors, Alice
Lehman, +1-704-374-4139, Ellen Taylor, +1-212-214-1904, all of
Wachovia Corporation
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