Northern Trust prices 15 mil shares at $50 each

Northern Trust Corp. began offering $750 million in shares, valued 9.1 percent less than yesterday's closing, as it sought to raise capital to repay government rescue-fund money.

Northern Trust priced 15 million shares at $50 each, the Chicago-based custody bank said in a statement today. The company also started selling about $500 million in five-year senior notes that may pay about 287.5 basis points more than Treasuries of similar maturity, according to a person familiar with the offering who declined to be identified because terms aren't set. A basis point is 0.01 percentage point.

Northern Trust said yesterday it planned to raise $1.25 billion to finance the repurchase of $1.6 billion in preferred stock and warrants sold to the U.S. Treasury last year. The sale was part of the government's Troubled Asset Relief Program that injected about $198 billion of capital into banks to stabilize financial markets.

The bank will use "other resources, including cash" to complete the repurchase, Doug Holt, a Northern Trust spokesman, said yesterday in an interview.

Northern Trust fell $2.20, or 4 percent, to $52.81 at 11:10 a.m. New York time in Nasdaq Stock Market trading. Yesterday, the stock closed at $55.01. The company has declined 29 percent in the past year, compared with a 47 percent fall for the Standard & Poor's index of asset managers and custody banks.

Golf

Northern Trust was criticized by U.S. lawmakers in February for spending money entertaining clients and employees at a professional golf tournament it sponsored near Los Angeles. U.S. Representative Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, demanded that Northern Trust pay back TARP funds equal to the amount it spent on the event.

The company said in response that it would return its TARP money "as soon as prudently possible."

The government's financial assistance for banks "had very good intentions when it started, but now has grown into a politicized form of retribution for banks that accepted it," Gerard Cassidy, an analyst in Portland, Maine with RBC Capital Markets, said in an interview.

Cassidy said he had expected a share-price discount of 5 percent to 7 percent from yesterday's closing price. Mark Fitzgibbon, an analyst at Sandler, O'Neill & Partners LP in New York, said he expected the offering to be 4 percent to 5 percent lower than yesterday's price.

Goldman Sachs

Goldman Sachs Group Inc., which is also seeking to repay TARP money, raised $5 billion April 14, selling 40.65 million shares at a price 5.5 percent less than the previous day's share price.

Northern Trust pays a portion of a 5 percent annual dividend on the preferred shares each quarter. In the first quarter, the company paid $23 million.

The equity sale is being led by units of Goldman Sachs and Morgan Stanley and co-managed by a division of UBS AG. The underwriters will have the option to buy an additional 15 percent of the offered number of common shares.

Northern Trust, like other custody banks, keeps records, tracks performance and lends securities to institutional investors including mutual funds, pensions and hedge funds. It also operates mutual funds and investment accounts for institutions and wealthy individuals.

It had $2.84 trillion in assets under custody, and $522.3 billion in assets under management as of March 31.