It’s something the Columbus, Ga.-based regional bank has done before. And it positions the company to make other financial moves without the maturing debt hanging over its head waiting to be repaid, said Patrick Reynolds, Synovus’s director of investor relations.
“It’s a fact of life that those notes are coming due. So, you have to make decisions on when you should refinance those notes,” Reynolds said of the outstanding notes valued at $206.75 million. They are due to mature Feb. 15, 2013. “The thought process behind it is, if you can, pay them off now. It takes that off the table when you’re dealing with other issues, maybe next year,” he said. “Those issues would include, as we’ve talked about, our continued profitability, the recovering of the $800 million of our deferred tax asset allowance, and the possible repayment of TARP.”
Synovus, parent company of Augusta First Bank and Trust, still owes $968 million through the federal Troubled Asset Relief Program. It took the money in December 2008 at the peak of the U.S. financial crisis to shore up its operations.
Kessel Stelling, Synovus chairman and chief executive officer, has repeatedly said repayment of TARP funds will occur after the company becomes consistently profitable. The bank eked out a penny-per-share profit in the third and fourth quarters of 2011. But last month he said repayment is not a “near-term event.”
The deferred tax asset, meanwhile, was accumulated over three straight years of losses. It can be used in part or in full to offset taxes owed the government, presumably boosting net earnings at some point in the future.
Reynolds said the company made the decision to sell the new senior notes, which will mature in 2019, because the debt markets are active now.
“You never know,” he said. “Three months ago, four months ago, the Greeks had blown up the debt market and nobody could issue debt at that time. So it’s a timing issue. It’s an issue of knowing that you are going to refinance that debt, picking the right time to do that and, hopefully, getting the benefit of that out of the way.”
The public offering of $250 million in senior notes began Tuesday. While individuals can buy them, Reynolds said, institutional investors — such as mutual fund managers — will likely be the primary purchasers.
Retiring the old 2013 notes involves Synovus buying them back at a certain value. Note holders have until March 6 to cash them in.