In an effort to ease its debt pressure,
) recently announced the redemption of 8.15% Trust Preferred
Securities (TruPS). These TruPS are worth $125.0 million.
BANCORPSOUTH (BXS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
ZIONS BANCORP (ZION): Free Stock Analysis
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The redemption price associated with these preferred stocks is
$25 per TruPS. Moreover, any unpaid and accrued interests will be
included with the redemption price and disbursed to stockholders
within the next 60 days.
The redemption will be funded by $75.0 million of available cash,
along with $50.0 million of borrowing. BancorpSouth will also
have to bear a one-time unamortized issuance cost of $2.9 million
(after-tax) in third-quarter 2013.
Nevertheless, TruPS redemption will lower interest expenses and
enhance BancorpSouth's liquidly position in the following
quarters. Attributable to the aforesaid redemption,
BancorpSouth's interest expenses are expected to fall by $9.1
million net of tax savings annually, while net interest margin is
likely to improve by 9 basis points. The company's interest
expense in first quarter 2013 was $14.9 million and net interest
margin was 3.37%.
Notably, BancorpSouth's decision to redeem TruPS is in line with
the new capital rules proposed by the Federal Reserve in Jun
2012. Underlying the new guidelines, TruPS issued prior to May
19, 2010 will not be considered for calculation of Tier 1 capital
In the last few months other banks that have undertaken similar
redemption actions include
Regions Financial Corporation
), which redeemed TruPS worth $498.0 million,
), $285.0 million, and
JPMorgan Chase & Co.
), $5 billion.
carries Zacks #3 (Hold).