UPDATE 2-Synovus terminates offer to exchange shares for notes

Mon May 3, 2010 12:54pm EDT

* Says decision to avoid the risk of an "ownership change"

* Cites substantial increase in common stock from offering

* Shares up 4 percent (Recasts, adds details, analyst comments)

By Archana Shankar

BANGALORE, May 3 (Reuters) - Synovus Financial Corp (SNV.N) said it will not exchange its shares for notes after the lender raised $1 billion in an offering, selling more shares and equity units than expected, providing it a much needed capital cushion.

"With the number of shares they have issued in the last year and now, it may be difficult for them to generate enough earnings to benefit shareholders long term," analyst Gary Tenner of Soleil-Tenner Investment said.

On Wednesday, the regional bank sold 255 million common shares and equity units to raise $1 billion of cash, above its expectation of $630 million. [ID:nN28223208]

After the sale of 255 million common shares and equity units, and underwriters exercising options, the size of the common stock offering increased to 293.3 million shares and 13.8 million tangible equity units, the company said.

Synovus had offered common shares for 5.125 percent subordinated notes due 2017. It terminated the exchange offer to avoid or reduce the risk of an "ownership change."

The shares and equity units offering was part of a blue print by the company to tackle its capital shortfall.

Synovus is likely to lose money for most of 2010, which will have a negative impact on its capital ratios, but the capital raise has put the company on a good footing for now, analyst Tenner said.

The lender, which is saddled with close to a billion dollars in bailout money, may also look to repay the government funds after its capital issues have been addressed.

Shares of the Columbus, Georgia-based bank rose 4 percent to $3.13 in morning trade, but pared most of its gains to trade up 1 cent at $3.02 in midday trade Monday on the New York Stock Exchange. (Reporting by Archana Shankar in Bangalore; Editing by Ratul Ray Chaudhuri)