SunTrust Sells Largest Structured Note as Deal Sizes Increase
SunTrust Banks Inc. (STI) sold its largest U.S. structured note last month, almost two years after entering the market.
The bank issued $22.5 million of three-year, fixed-to- floating rate securities on July 26, according to data compiled by Bloomberg of sales registered with the U.S. Securities and Exchange Commission. The Atlanta-based company sold $27.5 million of notes in July, topping its total issuance of $23.4 million last year.
While SunTrust isn’t in the top 10 of U.S. issuers, dominated by Bank of America Corp.’s $3.34 billion of sales this year, the size of its offerings has increased since the first one, on Oct. 26, 2010, Bloomberg data show. SunTrust’s deals averaged $1.48 million in 2010, $5.86 million in 2011, and $10.2 million this year.
The three-year securities issued in July yield 2.4 percent annually for the first 18 months, according to a prospectus filed with the SEC. After that, they switch to 50 basis points plus the three-month London interbank offered rate, with a minimum coupon of 1 percent and a cap of 5 percent. The bank distributed the notes for a 0.82 percent commission.
Structured notes are securities created by banks, which package debt with derivatives to offer customized bets to investors while earning fees and raising money. Derivatives are contracts whose value is derived from stocks, bonds, currencies and commodities. A basis point is 0.01 percentage point.