Mizuho plans to raise $2.8 billion with preferred stock

TOKYO (Reuters) - Japan's Mizuho Financial Group (8411.T: Quote, Profile, Research) plans to raise $2.8 billion by issuing preferred shares, as the subprime-hit bank looks to shore up its capital base.

Mizuho, Japan's second-largest bank, said it would issue 303 billion yen ($2.8 billion) of the shares, which do not convert to common stock, to domestic institutional investors.

Bad bets on the U.S. subprime mortgage market cost the bank 645 billion yen in the year to March 2008, making it Japan's biggest casualty in the credit crisis.

Although most Japanese banks avoided subprime investments, Mizuho took an aggressive tack.

Most of its losses came from the London office of its securities unit, where the bank formerly employed a team poached from French rival Calyon to trade the risky securities.

The bank, which still had 994 billion yen worth of subprime-related investments as of March, said it expects further losses in the year to March 2009.

The preferred shares are aimed at increasing the bank's capital base, Mizuho said in a statement in May. At the time it did not give details of the offering.

About 250 billion yen worth of the shares will pay a dividend rate of 3.85 percent a year, while the remainder will pay 4.26 percent, the bank said on Friday.

The dividend rates will be fixed until June 2019, after which they will be a floating rate, the bank said.