Regions Financial To Sell New Preferred

Regions Financial Corporation (NYSE:RF) will be selling a new preferred issue.

The issue will be a fixed-to-floating rate issue and will have the normal terms for a banking preferred stock. It will be non-cumulative, but qualified for preferential tax treatment.

This issue will likely NOT be investment grade – the other issues RF has outstanding are a couple notches below investment grade.

There is 1 change and that will be that the issue will be fixed for 10 years (2029) before it moves to the floating rate period. Maybe 3-5 years ago most of the f-t-f issues had fixed rate periods of 10 years, but in more recent years that has moved to a 5 year fixed period–maybe we are going to move back to 10 year fixed periods. In theory the longer the fixed rate period the higher the fixed coupon should be–we shall have to wait and see. We do note that RF sold a F-t-F issue in 2014 and it has a 10 year fixed period at 6.375% and it has traded strongly in the $27.80/share area. You can see it here.

The preliminary prospectus can be read here.

10 thoughts on “Regions Financial To Sell New Preferred”

  1. Anyone know if they plan to call the RF.A issue with the proceeds from this?

    A brief Google search failed to turn up anything. I have made good money on RF-A and would hate to see it go.

    1. Scott R — here is what they have written–

      We expect to receive net proceeds from this offering after deducting underwriting discounts and commissions and estimated offering expenses payable by us of approximately $ (or approximately $ if the underwriters exercise in full their option to purchase additional depositary shares). We expect to use the net proceeds from the sale of the depositary shares for general corporate purposes, which may include repurchases of shares of our outstanding common stock from time to time.

      S-16

      1. Thanks Tim, if I am reading that correctly it sound like the other preferred might be safe for now unless their redemption could fall under “general corporate purposes.”

        1. I’m interested to know if anybody knows any general guidelines as far as interest rate spreads that make it feasible for a company to redeem higher coupon issues? I realize that there may be many factors involved.

          1. I have seen one in a preferred stock investing book that says when a company can save 0.375% it is worth issuing a new preferred and redeeming the older issue.

            Not sure, if I have seen that in the marketplace

    2. It is on my likely to be called list. I would be selling at 40-50 cents over stripped par.

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