Avista Oks Stock Conversion Preferred Shares Will Be Converted To Common Stock Next Month

Capitalizing on the recent rapid gains of its common stock, Avista Corp. directors Friday authorized conversion of all 1.5 million outstanding shares of $12.40 Series L Preferred Stock back into common shares Feb. 16.

Avista Chairman and CEO Tom Matthews said holders of the preferred stock will be notified by mail about the conversion.

The convertible preferred stock, also called RECONS, or Return-Enhanced Convertible Securities, had been issued in November 1998 to preserve dividends of $1.24 a share after dividends on common shares were cut to 48 cents. Investors swapped about 15 million of Washington Water Power common stock for the preferred.

Appreciation on the preferred shares was capped at $24. Common stock, which traded for months at about $15-$17 a share, soared Jan. 20 after Microsoft founder Bill Gates purchased 5 percent of Avista Corp. The runup briefly surpassed $60 a share, but the stock has since leveled off. Shares closed Friday at $31.50, down $1.81 on the New York Stock Exchange.

In an interview after Friday’s market close, Matthews said the company’s stock “will have good support in the 30s ($30-$40 range), so we had the opportunity to convert the RECONS and give investors a chance to grow with the common shares.”

He added: “In the last week, day traders and electronic traders ran the stock up and down. Now the big funds around the country are buying the stock - funds that had not been buying a utility - and there is price support and growth at this level.”

Matthews and Avista Vice President Dave Brukardt said investors who paid $18 for the preferred shares will receive the $24 cap price, get their dividends early and their preferred stock will be converted to common shares.

Matthews said the conversion plan is a “win-win” which fulfills the commitment to a company growth strategy. “Our three-year strategic plan is on track,” he said. Asked if investors of the preferred shares had pressed for the conversion, Matthews said, “There was some discussion, but no pressure.” He said a number of investors hold both common and convertible preferred shares.