Central Pacific Financial Corp. Plans for Reverse Stock Split and Announces Preliminary Record Date for Rights Offering

HONOLULU, Jan. 21, 2011 /PRNewswire/ -- Over the past several months, Central Pacific Financial Corp. (the "Company" or "CPF"), parent company of Central Pacific Bank ("CPB"), announced various transactions in connection with its proposed recapitalization.  Affiliates of The Carlyle Group and Anchorage Capital Group, L.L.C., other institutional investors and certain CPF directors and officers and their affiliates agreed to invest an aggregate of $325 million in CPF common stock in a private placement at a purchase price of $0.50 per share (or $10 per share after giving effect to the reverse stock split described below).  In addition, the United States Department of the Treasury agreed, subject to execution of the definitive exchange agreement, to exchange its CPF preferred stock and accrued dividends thereon into shares of CPF common stock having an aggregate value of approximately $55.8 million, with the number of shares determined based on the same per share purchase price as paid by the investors in the private placement.  The closings of the private placement and the exchange are conditioned upon one another, the receipt of requisite regulatory approvals, a one-for-twenty reverse stock split of CPF common stock and other customary closing conditions.  The Company expects the closing to occur within the next month, assuming satisfaction of the remaining conditions to closing.

In anticipation of the closing and in order to facilitate closing at the earliest possible date, the Company plans to promptly file an amendment to its articles of incorporation with the Department of Commerce and Consumer Affairs of the State of Hawaii (the "DCCA") to effectuate the reverse stock split, which would become effective upon the filing, contingent upon acceptance of the filing by the DCCA.  The reverse stock split was previously approved by CPF's shareholders at the shareholder meeting on May 24, 2010.  No fractional shares of common stock will be issued as a result of the reverse stock split. For each holder of common stock, the number of shares held prior to the effectiveness of the reverse stock split will be divided by twenty and, if the resulting number is not a whole number, then such number will be rounded up to the next nearest whole number.  The Company will announce the effective date of the reverse stock split promptly following acceptance of the filing by the DCCA.  For more information on the reverse stock split, please see the Company's proxy statement for the 2010 shareholders meeting filed with the Securities and Exchange Commission.

As previously announced and as part of the recapitalization, the Company intends to conduct a rights offering after the closing of the private placement and the exchange that will allow current shareholders or their transferees to purchase up to $20 million of common stock at the same purchase price per share as paid by the investors in the private placement.  The record date for the rights offering, which will be after the effectiveness of the reverse stock split, will be the business day prior to the closing of the private placement and the exchange.  Because closing depends upon the timing of satisfaction of all remaining closing conditions, the exact date cannot be determined at this time.  As a result, the Company will issue a press release with the applicable record date, expiration date and subscription ratio when that information is known, as well as the date on which the Company expects the certificates evidencing the rights to be mailed.

The Company is also announcing its reliance on the financial viability exception to the shareholder approval requirements of the New York Stock Exchange ("NYSE").  The rules of the NYSE would normally require approval of the Company's shareholders prior to the issuance of the common stock in the private placement and the exchange under Section 312.03 of the NYSE Listed Company Manual ("LCM").  However, the NYSE may grant, upon application, an exception from this requirement under Section 312.05 of the LCM, which provides that an exception may be granted when (i) the delay in securing shareholder approval would seriously jeopardize the financial viability of the enterprise and (ii) reliance by the Company on this exception has been expressly approved by the Audit Committee of the Board of Directors of the Company.

CPB has been subject to a consent order with the Federal Deposit Insurance Corporation and the Hawaii Division of Financial Institutions since December 9, 2009.  Among numerous requirements, the consent order mandated CPB to increase its leverage capital ratio to 10% and total risk-based capital to 12% by March 31, 2010.  CPB is past this deadline.  Receipt of a substantial amount of new capital is critical to the Company's recovery.  Without this new capital on a timely basis, CPB will likely experience further regulatory action.  In its report on the Company's 2009 financial statements, KPMG LLP, the Company's auditors, expressed substantial doubt regarding the Company's ability to continue as a going concern.  The Company has determined that, given the urgency of the need for additional capital, any delay in completing the recapitalization on the earliest possible date would jeopardize the transaction.

The Board of Directors of the Company and its Audit Committee determined that the delay necessary in securing shareholder approval prior to the issuance of common stock in the private placement and the exchange would seriously jeopardize the financial viability of the Company.  Because of that determination, both the Board of Directors and the Audit Committee expressly approved the Company's omission to seek the shareholder approval that would otherwise have been required.  The NYSE has approved the Company's application under Section 312.05 of the LCM.

The Company, in reliance on the exception in Section 312.05 of the LCM, is mailing to all shareholders a letter notifying them of its intention to issue the common stock in the private placement and the exchange without seeking their approval.

About Central Pacific Financial Corp.

Central Pacific Financial Corp. is a Hawaii-based bank holding company with $4.2 billion in assets.  Central Pacific Bank, its primary subsidiary, operates 35 branches, 115 ATMs, and a residential mortgage subsidiary in the state of Hawaii.  For additional information, please visit the Company's website at http://www.centralpacificbank.com.  

Forward-Looking Statements

This document may contain forward-looking statements concerning plans and expectations or assumptions underlying or relating to any of the foregoing.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts, and may include the words "believes", "plans", "intends", "expects", "anticipates", "forecasts" or words of similar meaning.  While we believe that our forward-looking statements and the assumptions underlying them are reasonably based, such statements and assumptions are by their nature subject to risks and uncertainties, and thus could later prove to be inaccurate or incorrect.  Accordingly, actual results could materially differ from projections for a variety of reasons, to include, but not limited to: the impact of local, national, and international economies and events, including natural disasters, on the Company's business and operations and on tourism, the military, and other major industries operating within the Hawaii market and any other markets in which the Company does business; the impact of regulatory actions on the Company including the Consent Order by the FDIC and the Hawaii Division of Financial Institutions; the impact of legislation affecting the banking industry including the Emergency Economic Stabilization Act of 2008 and the Dodd-Frank Act Wall Street Reform and Consumer Protection Act; the impact of competitive products, services, pricing, and other competitive forces; movements in interest rates; loan delinquency rates and changes in asset quality generally; the price of the Company's stock; volatility in the financial markets and uncertainties concerning the availability of debt or equity financing; the impact of regulatory supervision; and the timing of the closing of the Company's recapitalization.  For further information on factors that could cause actual results to materially differ from projections, please see the Company's publicly available Securities and Exchange Commission filings, including the Company's 2010 Form 10-K.  The Company does not update any of its forward-looking statements.

Cautionary Statements

The issuances of the securities in the private placement and the exchange described in this release have not been and will not be registered under the Securities Act of 1933 or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws.  This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any jurisdiction or state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction or state.

This press release shall not constitute an offer of any securities for sale.  The shares that may be purchased in the rights offering described in this release will be offered by means of a prospectus.  A registration statement relating to such securities has not been filed with the Securities and Exchange Commission.  Such securities may not be sold nor may offers to buy be accepted prior to the time the registration statement is filed and becomes effective.  This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any jurisdiction or state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction or state.

SOURCE Central Pacific Financial Corp.