Synovus Financial Prices Preferred

Banker Synovus Financial Corporation (NYSE:SNV) has priced their new fixed-rate reset preferred shares.

The company is selling 14 million shares (with no over allotment shares).

The initial fixed coupon is a meager 5.875% which will go to a “reset rate” on the 1st call date at 4.127% plus the 5 year treasury rate. There after the rate will be reset every 5 years.

This issue should trade on the OTC Grey market tomorrow, but the temporary ticker has not yet been announced.

The pricing document can be found here.

14 thoughts on “Synovus Financial Prices Preferred”

  1. An additional item to consider. This is a 5-year reset, not a 90-day reset like we are accustomed to in the US. It’s like the 5-year resets that are often sold in Canada, with one HUGE difference. There in no option to convert from a 5-year reset to a 90-day reset, as the Canadians do. If it happens to reset at a very low rate you’re stuck with it for a very long time.

    Not inconceivable that you could see this $25 issue drop to the low teens on a low reset. Without the option to convert to a 90-day reset I would not touch this issue.

    1. This doesn’t seem like a big gamble from my view. The initial rate of 5.75% is right where it would be 5 years from now if the 5 yr T bill was where it is currently. In order to be as bearish as you seem, one has to assume that the T bill yield will fall substantially from what is already a historically low yield. I think it’s more likely that the T bill yield will rise and the issue gets called in five years. I guess this is what makes a market. I bought 500 shares.

      1. Retired, I agree. Many of the financial preferreds have steadily been coming to market over the past few years (relative) with decreasing yields. BAC, for example, was coming to us with 6.5 and then 6.25% general yields. Last year, that was dropped to 6% flat. Now, they just released a 5.375% this month. 5.75% seems to be the new normal for where rates are and with more cuts by the Fed forecast, I see 5.5% issues coming to market in my crystal ball. I also went long this offering, but not nearly as deep into it as I normally would – simply because of the lack of credit quality and the lower yield. I’d rather put that money into ~7% yielders like CNP-B and the new Dominion hybrid that just came out. Both have dropped over the past few days, presenting a nice bargain to add to my existing stable. MBINP is another financial yielding a healthy amount of $$.

  2. They have an outstanding 5.9% bond rated BB+ with a YTM of 5.3% so the spread in owning the riskier preferred seems crazy low. I don’t own the bond.

    1. Pity the bond is illiquid otherwise it would be a good short-term deposit alternative.

      1. That 5.90% bond = a 10 year bond and is rated the equivalent of this preferred because it’s a subordinated bond. As a 10 year, it’s tough to think of it as a short term deposit alternative… Synovus does have a senior unsecured BBB- rated 3.125% due 11/1/2022 trading just north of 3% though which might be considered an alternative. Cusip SNV4558290.

          1. Man, I just can’t get anything right the first time on this one…. for the sake of accuracy, the subordinated bond is rated BB+ while this preferred is BB-.

        1. I was referring to the 5.75 12/15/2025 bond that is trading well above the call price (par) so it’s offering a ytm of 3.45% till December 2020.

  3. The company doesn’t seem that bad… Why such a crummy rating on this offering?

    From y!

    All the long-term and short-term ratings, along with assessments of Synovus Bank, primary banking subsidiary of Synovus Financial Corporation SNV, have been upgraded by Moody’s Investors Service, the rating arm of Moody’s Corporation MCO. However, the rating firm’s outlook for the bank has been affirmed at “stable”.

    Long-term deposit rating of Synovus Bank has been upgraded to A3 from Baa1 and issuer rating from Ba1 to Baa3. Further, counterparty risk rating has been upped to Baa2 from Baa3, while long-term counterparty risk assessment has been upgraded to Baa1(cr) from Baa2(cr).

    In addition, short-term counterparty risk rating has been upgraded to Prime-2 from Prime-3. Notably, short-term deposit rating and short-term counterparty risk assessment has been maintained at Prime-2 and Prime-2(cr), respectively. Also, the standalone baseline credit assessment of baa3 for the bank has been upped to baa2.

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