Midwest Banc Holdings, Inc. Announces Exchange by the United States Treasury of $84.8 Million of Preferred Stock into a New C...

Midwest Banc Holdings, Inc. (NASDAQ: MBHI) (the “Company”), the holding company for Midwest Bank and Trust Company (the “Bank”), today announced that it entered into an agreement with the United States Treasury pursuant to which the U.S. Treasury has agreed to exchange the approximately $84.8 million of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series T it owns, plus approximately $4.5 million in unpaid dividends on such preferred stock, for a new series of Fixed Rate Cumulative Mandatorily Convertible Preferred Stock, Series G with a like liquidation preference (the “New Preferred Stock”). The New Preferred Stock has the same dividend rate as the Series T preferred stock, namely a dividend rate of 5% per annum from the issue date to February 15, 2014 and 9% per annum thereafter. The Company expects to complete this exchange and issue the New Preferred Stock before the end of this week.

The U.S. Treasury has the authority to convert the New Preferred Stock into the Company’s Common Stock at any time. In addition, the Company can compel a conversion of the New Preferred Stock into Common Stock, subject to the following conditions:

    
      
        
           
        
        
           
        
        
           
        
        
          (i)
        
        
           
        
        
           
        
        
          the Company receives appropriate approvals from the Federal Reserve;
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
          (ii)
        
        
        
        
        
        
          approximately $78.8 million principal amount of the Company’s senior 
          and subordinated debt shall have previously been converted into 
          Common Stock on terms acceptable to the U.S. Treasury in its sole 
          discretion;
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
          (iii)
        
        
        
        
        
        
          the Company shall have completed a new cash equity raise of not less 
          than $125 million on terms acceptable to the U.S. Treasury in its 
          sole discretion; and
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
          (iv)
        
        
        
        
        
        
          the Company has made the anti-dilution adjustments to the New 
          Preferred Stock, if any, as required by the terms thereof.
        
      
    
    

Unless earlier converted, the New Preferred Stock converts automatically into shares of the Company’s Common Stock on the seventh anniversary of the issuance of the New Preferred Stock.

If the U.S. Treasury were to seek to convert all of the approximately $89.3 million in liquidation preference of the New Preferred Stock, the Company would be required to issue approximately 47.1 million shares of its Common Stock in such conversion, subject to any required anti-dilution adjustments.

"The entry of the U.S. Treasury into the exchange agreement is a positive development. Midwest appreciates Treasury's support and cooperation. Though we do not have commitments for new investment, our discussions with possible investors continue. The convertibility feature of the New Preferred Stock will facilitate these conversations," Roberto R. Herencia, Midwest CEO, said.

Results of the Special Meeting. The Company also announced today that the holders of its Common Stock had approved by the requisite number of votes all proposals submitted for approval at the special meeting of the holders of Common Stock held on March 2, 2010. These proposals include approvals to:

• amend the Company’s certificate of incorporation to increase the number of authorized shares of Common Stock from 64 million to four billion shares; effect a reverse stock split of the Common Stock at any time prior to December 31, 2010, as determined by the board of directors; and eliminate the voting rights of the Common Stock with respect to certain amendments to the certificate of incorporation that relate solely to the terms of outstanding series of preferred stock;
• eliminating certain rights of the holders of Series A Preferred Stock with respect to dividends on the Series A Preferred Stock and the election of directors, which proposals were previously approved by holders of the Company’s Depositary Shares; and
• issue shares of Common Stock upon any conversion of the New Preferred Stock by the U.S. Treasury.

About Midwest

We are the holding company for Midwest Bank and Trust Company, a half century old community bank with $3.4 billion in assets at December 31, 2009. We have two principal operating subsidiaries; Midwest Bank and Trust Company and Midwest Financial and Investment Services, Inc. Midwest Bank has 26 locations serving the diverse needs of both urban and suburban Chicagoland businesses and consumers through its Commercial Banking, Wealth Management, Corporate Trust and Retail Banking areas.

Forward-Looking Statements

This press release contains certain “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements as to expectations regarding the Company’s Capital Plan, the Exchange Offer and any other statements regarding the Company’s expectations or future results, plans or strategies. The Company’s ability to predict results, or the actual effect of future plans or strategies, is inherently uncertain. In particular, our ability to realize the objectives of our Capital Plan is primarily dependent upon the success of our efforts to raise substantial amounts of new equity capital, and there can be no assurance that we will be able to do so. These statements should be reviewed in conjunction with the Company’s Annual Report on Form 10-K, including the information under “Risk Factors” therein, its Quarterly Reports on Form 10-Q and other publicly available information filed with the SEC regarding the Company. Such publicly available information sets forth certain risks and uncertainties related to the Company’s business that could cause actual results to differ from those set forth in the forward-looking statements or that could have a material effect on the operations and future prospects of the Company, and should be considered in evaluating forward-looking statements contained herein.