National City faces lawsuit over investment deal

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CLEVELAND — An Ohio newspaper’s parent company, which owns stock in National City Corp., has sued seeking to block a $7 billion deal that is expected to rescue the bank from bad loans tied to home mortgage lending.

National City made a regulatory filing May 2 that says it has completed the deal, which gives select shareholders a 70 percent stake in the regional bank at $5 per share.

In the lawsuit filed Thursday, the Dispatch Printing Co., parent of The Columbus Dispatch, claims the deal dilutes the stock value by allowing investors to buy stock for $5 a share at a time when shares were trading at $8.

In last week’s Securities and Exchange Commission filing, National City said it issued 126.2 million shares of common stock at $5 per share and 63,690 shares of preferred stock at a price of $100,000 per share that can be converted to shares valued at $5 per share.

Under the National City deal, the company will receive $985 million from New York private equity firm Corsair Capital and more than $6 billion from other institutional investors. The filing did not disclose the other investors.

The Franklin County Common Pleas Court lawsuit requests a permanent injunction to erase the deal and an unspecified sum in compensatory damages. It names all 12 members of National City’s board of directors, including John Raskind, chairman and chief executive, and the investors involved in the deal.

The deal was made public April 21.

John Zeiger, attorney for Dispatch Printing, said the company owns a “significant” amount of stock but declined to specify how much.

National City spokeswoman Kristen Baird Adams said Friday that the allegations listed in the lawsuit are inaccurate.

The bank’s shareholders expressed frustration with the deal at an annual shareholder meeting on Tuesday. Raskind has said National City will need time to recover because it remains stuck with bad loans tied to the risky mortgages.

Shareholders are expected to approve the deal when they vote on the arrangement on June 23.

National City operates about 1,400 bank branches in Ohio, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, Pennsylvania and Wisconsin.

The Dispatch has daily circulation of about 230,000 and Sunday circulation of about 344,000. Dispatch Printing also operates television and radio stations, magazines, community newspapers and a 24-hour cable news channel.

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