La.’s Hibernia Corp. Warns of Hurricane-Related Costs

Hibernia Corp., a Louisiana-based banking company trying to complete its $5 billion acquisition by Capital One Financial Corp., warned it faces substantial costs and financial uncertainties stemming from Hurricane Katrina.

In a filing with the Securities and Exchange Commission, in which Hibernia recommends that shareholders approve the deal, the company said it would “experience increased costs, including the costs of rebuilding or repairing branches and other properties, and replacing equipment and other property, some of which will not be covered by insurance.”

Hibernia, which has offices in Louisiana and Texas, has extensive operations in the New Orleans metropolitan area, which was devastated by Katrina on Aug. 29.

The company also said it expected “to experience substantial employee and recovery costs.”

The disclosure said the hurricane had a twofold effect on Hibernia’s loan portfolio through damage to property pledged as collateral and by impairing some borrowers’ abilities to repay loans.

“Hurricane Katrina may continue to affect Hibernia’s loan originations and loan portfolio quality into the future and could also adversely impact Hibernia’s deposit base,” the filing said.

But Hibernia said the storm could have a positive effect through “future economic activity from government, private and philanthropic investment” that “could increase funds available for deposit and create increased opportunities for loan originations.”

The filing did not have any cost estimates.

The merger vote has been delayed twice because of Katrina and now is scheduled for Nov. 15. The original merger price of $5.3 billion was trimmed by 9 percent to $5 billion following Katrina’s rampage across southeastern Louisiana.

McLean, Va.-based Capital One, a major credit card issuer, agreed to acquire merchant banker Hibernia in March as part of an effort to expand from direct-mail marketing to branch banking outlets. Capital One competes with large institutions such as Bank of America Corp., which can sell cards through its 6,000 branches.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Topics Catastrophe Natural Disasters Louisiana Hurricane