First Horizon raising $600M in stock offer; changes dividend

MEMPHIS, Tenn.—Regional bank First Horizon National Corp. said Monday it will raise $600 million through a common stock offering.

Pricing of the offering was not disclosed.

First Horizon will also change its dividend policy, paying out quarterly dividends in shares of common stock instead of cash. The bank currently pays a cash dividend of 20 cents. After it pays a cash dividend July 1, all subsequent dividends will be paid in the form of common stock.

The bank said it plans to return to paying a cash dividend once market conditions and earnings improve.

Last week in a research report, Keefe, Bruyette & Woods Inc. said First Horizon would likely need to raise $1 billion in capital as the bank has "significant exposure" to construction and home equity loans, two types of loans expected to increasingly default in the coming quarters.

Lending markets have deteriorated rapidly since the middle of 2007 forcing many banks to increase loss reserves to cover troubled loans. Because of mounting reserves and a slowing economy, banks have been forced to raise cash to shore up their capital positions.

Underwriters will be granted an option to purchase up to an additional 15 percent of common stock to cover over-allotments.