Synovus Financial CorporationSNV is raising $250 million in capital through the issuance of fixed-to-floating rate subordinated notes. Notably, the company plans to utilize the proceeds to meet near-term debt obligations, and fund potential acquisitions as well as share buybacks.
These notes carry an initial fixed interest rate of 5.75%, payable semi-annually. However, given its fixed-to-floating nature, the annual rate will be reset on a quarterly basis, to match the then-current 3-month LIBOR plus a spread of 418.2 basis points. Subject to certain customary closing conditions, the offering is expected to close on Dec 7.
While part of the capital raised through this issue will be used to redeem the 5.125% subordinated notes, due in 2017; a certain amount will likely be used to partially fund the $300-million share repurchase program, announced by the company in Oct 2015.
In Nov 2015, Moody's Investors Service, a rating arm of Moody's Corporation MCO , upgraded Synovus and its bank subsidiary to 'Positive' from 'Stable', Moreover, the rating agency affirmed the Ba2 rating for the company's senior unsecured debt.
Notably, the outlook revision was driven by Synovus' efforts to substantially reduce its exposure to risky commercial real estate loans. Also, lower non-performing assets and improvement in its overall risk profile supported the upgrade.
Synovus currently carries a Zacks Rank #3 (Hold).