Regions Bank 2009 Annual Report Download - page 160

notes may be accelerated only in the case of certain events involving bankruptcy, insolvency proceedings or
reorganization of the Company. The subordinated notes described above qualify as Tier 2 capital under Federal
Reserve guidelines. Approximately $175 million in subordinated notes matured during the first quarter of 2009.
None of the subordinated notes are redeemable prior to maturity.
As of December 31, 2009, Regions had senior notes totaling $5.3 billion. In November 2009, Regions
issued $700 million of senior notes (gross of discount) bearing an initial fixed rate of 7.75%, with a final maturity
on November 10, 2014. Approximately $250 million of senior debt notes matured during the second quarter of
2009. In October 2008, the Federal Deposit Insurance Corporation (“FDIC”) announced a new program – the
Temporary Liquidity Guarantee Program (“TLGP”) – to strengthen confidence and encourage liquidity in the
banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts and certain holding
companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of
dollar amount. Under the original rules, certain newly issued senior unsecured debt with maturities greater than
30 days issued on or before June 30, 2009, would be backed by the “full faith and credit” of the U.S. government
through June 30, 2012. The FDIC’s payment obligation under the guarantee for eligible senior unsecured debt
would be triggered by a payment default. The guarantee is limited to 125% of senior unsecured debt as of
September 30, 2008 that was scheduled to mature before June 30, 2009. This includes federal funds purchased,
promissory notes, commercial paper and certain types of inter-bank funding. Participants were charged a 50-100
basis point fee to protect their new debt issues which varies depending on the maturity date. Additionally,
participants could elect to pay a fee of 37.5 basis points on their TLGP capacity for the right to issue
non-guaranteed debt during the program. This fee was non-refundable and used to offset the guarantee fee for
issuances until exhausted. In December 2008, Regions Bank completed an offering of $3.75 billion of qualifying
senior bank notes covered by the TLGP. Payment of principal and interest on the notes will be guaranteed by the
full faith and credit of the United States pursuant to the TLGP. Several notes related to the TLGP also mature
during 2010. Approximately $250 million will mature June 11, 2010 currently having an interest rate of 0.66%,
$500 million will mature on December 10, 2010 currently having an interest rate of 0.91%, and $999 million will
mature December 10, 2010 with an interest rate of 2.75%. Also, $497 million of senior notes will mature during
December 2010 which have an interest rate of 4.375%. None of the senior notes are redeemable prior to maturity.
On June 22, 2009, the Company exchanged 33 million common shares for $202 million of outstanding
6.625% trust preferred securities issued by Regions Financing Trust II (“the Trust”). The trust preferred
securities were exchanged for junior subordinated notes issued by the Company to the Trust. The Company
recognized a pre-tax gain of approximately $61 million on the extinguishment of junior subordinated notes (see
Note 15 to the consolidated financial statements).
In April 2008, Regions issued $345 million of junior subordinated notes (“JSNs”) bearing an initial fixed
interest rate of 8.875%. These JSNs have a scheduled maturity of June 15, 2048 and a final maturity of June 15,
2078, and are redeemable at Regions’ option on or after June 15, 2013. The JSNs were issued to affiliated trusts,
which contemporaneously issued trust preferred securities which Regions guaranteed.
Other long-term debt at December 31, 2009, 2008 and 2007 had weighted-average interest rates of 2.9%,
2.9% and 6.1%, respectively, and a weighted-average maturity of 5.3 years at December 31, 2009. Regions has
$59 million included in other long-term debt in connection with a seller-lessee transaction with continuing
involvement (see Note 24 to the consolidated financial statements for further information).
Regions uses derivative instruments, primarily interest rate swaps, to manage interest rate risk by converting
a portion of its fixed-rate debt to a variable-rate. The effective rate adjustments related to these hedges are
included in interest expense on long-term borrowings. The weighted-average interest rate on total long-term debt,
including the effect of derivative instruments, was 3.6%, 4.6% and 5.7% for the years ended December 31, 2009,
2008 and 2007, respectively. Further discussion of derivative instruments is included in Note 21 to the
consolidated financial statements.
146