National Bank of Canada has entered into an agreement with a group of underwriters for a $100 million offering of preferred shares, the bank said Thursday.

The bank will issue the 4 million non-cumulative 5-year rate reset first preferred shares series 26, at a price of $25 a share, on a bought deal basis.

The issue, also with a $75-million option for the underwriters, yields 6.6% until Feb. 15, 2014, then will be reset every five years at 4.79 percentage points over the five-year government bond.

The first of such dividends, if declared, shall be payable on May 15, 2009. Thereafter, the dividend rate will reset every five years at a level of 479 basis points over the then 5-year Government of Canada bond yield.

Holders of the Series 26 Preferred Shares will have the right to convert their shares into an equal number of non-cumulative floating rate first preferred shares series 27, subject to certain conditions, on Feb. 15, 2014, and on February 15 every five years thereafter.

Holders of the Series 27 Preferred Shares will be entitled to receive quarterly floating dividends, as and when declared by the board of directors of National Bank, equal to the 90-day Government of Canada Treasury Bill rate plus 479 basis points.

National Bank says the net proceeds of the offering will be used for general corporate purposes and are expected to qualify as Tier 1 capital for the bank.

The offering is expected to closing on Jan. 30, 2009. National Bank.

On Wednesday, Royal Bank of Canada and Bank of Nova Scotia both announced $250 million issues of preferred shares,

IE