SunTrust Banks Inc. announced plans for a $1.4 billion stock offering, scrapping its effort to sell shares directly into the market, as it also announced its intention to use proceeds to repurchase as much as $1 billion in preferred and hybrid shares.
The company said the move marks an acceleration of its effort to bolster its capital levels by $2.2 billion following the results of government stress tests.
Shares were down 2.1% at $12.90 in recent premarket trading. The stock is off nearly 80% since September, though it has more than doubled since hitting a an all-time low in February.
SunTrust was one of the banks the government said needed to bolster its reserves. The Atlanta-based lender, along with other regional banks, has been hurt during the credit crunch thanks to its ties to construction and commercial real-estate loans, as well as longer exposure to the deteriorating housing market.
SunTrust is also aiming to repay $4.9 billion that it got through the Treasury Department's Troubled Asset Relief Plan. A number of lenders are trying to repay TARP funds to avoid restrictions that come along with them.
SunTrust said Monday it has sold about $260 million of its $1.25 million common stock offering unveiled last month, which is now suspended and expected to be terminated after the $1.4 billion sale is completed. The company will still proceed with a sale of $300 million in other securities.
Several companies, including Bank of America Corp., have opted in recent weeks to sell shares directly to the market instead of through an offering, the typical method getting new stock into investors' hands.
The $1 billion tender offer will expire at 11:59 p.m. EDT on June 26. The securities involved include depositary shares.