TD to raise $1.2B from stock sale

TD Bank one-month trading on the TSX

The Toronto-Dominion Bank said Monday that it will raise $1.2 billion by selling new shares at a discount to the market price.

Ed Clark, president and CEO, said the bank didn't need the capital, but "decided to build another layer of assurance," because investors are worried about the capital position of banks in the current markets.

TD will sell 30.4 million common shares for $39.50 each. The price is $3.40 below TD's close on the TSX on Monday, and is near the 52-week low of $39.22, hit last Friday. The high is $75.

TD stock got hammered last week, dropping more than $12, including the loss of $6.36 in one day after it disclosed a large loss on credit trades.

The stock rose $1.60 to $42.90 on Monday, as the whole financial sector moved up on news of the U.S. government support for Citigroup, a major bank.

The TD stock, combined with $220 million raised by selling preferred shares on Nov. 5, will boost the bank's Tier 1 capital ratio — a key measure of a bank's financial health, set by regulators — to about nine per cent from 8.3 per cent on Nov. 1, the bank said.

The stock sales and other measures the bank could take puts TD "an exceptionally strong capital position," Clark said in a news release.

The bank has a deal with a syndicate of underwriters led by its own TD Securities Inc. The underwriters have an option to purchase up to an additional 4.6 million shares. If they bought the maximum, the bank would raise nearly $1.4 billion.