Park National (PRK) in Newark, Ohio, announced Friday that it will repay the $100 million it received from the government's Troubled Asset Relief Program by issuing new debt and reducing its short-term investments.
The $6.8 billion-asset company said it has already issued $30 million of subordinated notes at a 7% interest rate and will use the proceeds to buy back 30% of the preferred shares it issued to the Treasury Department in late 2008. Though the interest on the preferred shares was 5%, Park National noted that it was not tax deductible, so the effective rate was 7.69%. Interest payments on the subordinated notes are tax deductible.
Park National intends to repay the remaining $70 million by shifting funds away from short-term investments, which are earning an average of just 0.25%. It expects to complete the full Tarp repayment on Wednesday.
Park National Chairman C. Daniel DeLawder said that the Tarp funds were a "sensible tool" that helped the company continue lending throughout the recession. Park National is exiting the program now because the economy is recovering,
"The continuing recovery in general economic conditions coupled with the sale...of our former Vision Bank subsidiary makes this a natural next step," he said.
Park National's shares were up 1.9% late Friday, to $66.18.
