Gediminas Jasionis

Regions Financial Corporation (NYSE: RF) struggles to leave TARP

by Gediminas Jasionis June 10, 2009
regions.gifRegions Financial Corporation's (NYSE: RF) plans to raise additional capital were blessed by Federal Reserve regulators. The company hopes to raise $2.5 billion, which should help them get closer to leaving the TARP program.

Stress tests completed on Regions Financial showed the company might theoretically incur $9.2 billion in loan losses over the coming two years. Although that is the worst case scenario, an additional capital raise was requested by the government.

To date, Regions Financial has already raised over $2 billion through equity financing. The company expects that additional shares to be offered will be sold over the coming month. Considering the still outstanding lack of capital, the company is still a subject to asset and business sales, debt-to-equity swaps, or preferred shares conversion.

Regions Financial owes the US government $3.5 billion. But even if the company had the money to repay this debt, the government won't allow it to leave TARP until strong improvements in their financial position are seen.

The company's share price has fluctuated around the $4 for nearly a month. Equity financing usually tends to hit the value of a company's stock, but in this case there is still some space for a drop until it reaches the unwanted $1 mark. This means the possibility of additional financing and thus a considerably easy way of leaving the TARP.



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