On Tuesday, Synovus Financial Corp. (SNV) announced the public offering of its senior notes worth $250 million. The notes will be due in 2019. The terms of the new notes offering were not fully disclosed.
The proceeds from the offering are intended to be used for the repayment of subordinated notes, due in February 2013. These notes are of total principal amount of $206.75 million, carrying an interest of 4.875%. The remaining amount will be used for other general corporate purposes.
J.P. Morgan Securities LLC, a division of JPMorgan Chase & Co. (JPM), is acting as sole book-running manager for the senior notes offering.
The sale of notes will provide the company some financial flexibility at this point. Synovus’ continued strengthening of balance sheet along with its focus on risk and expense management should propel its earnings going forward.
Earnings Recap
Last month, Synovus reported fourth-quarter 2011 net income attributable to common shareholders of one cent per share, outperforming the Zacks Consensus Estimate of breakeven. Though the results for the quarter marked a significant improvement from the loss of 23 cents reported in the year-ago quarter, it missed the prior quarter’s earnings by a penny.
The robust performance was attributable to improved credit trends with significant decline in credit costs along with continued implementation of efficiency initiatives. Quarterly results included net investment securities gains of $10.3 million coupled with a $5.9 million charge related to Synovus’ indemnification of the Visa Inc. (V) liability.
Our Take
We believe Synovus is in a recovery phase, aided by lower non-performing assets and improving operating efficiencies. Furthermore, the company’s planned expenses savings will act as a positive catalyst for Synovus. However, repayment of funds generated through Troubled Asset Relief Program (TARP) is still not expected in the near term.
Synovus currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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