SmartFinancial, Inc., a Tennessee-based financial institution, has announced an exchange offer for up to $100 million in aggregate principal amount of its 7.25% Fixed-to-Floating Rate Subordinated Notes due 2035. The offer allows holders of existing unregistered subordinated notes, originally issued on August 20, 2025, to exchange them for registered notes, thus easing compliance with regulatory requirements under the Securities Act of 1933.
The exchange offer is set to expire at 5:00 p.m. New York City time on a date to be specified in 2025, unless extended. SmartFinancial does not expect to receive any cash proceeds from this exchange transaction, as it merely facilitates the conversion of the Old Notes to New Notes without increasing the company's overall indebtedness.
From a strategic standpoint, the rationale behind this exchange offer is to fulfill obligations outlined in a registration rights agreement made with purchasers of the Old Notes. By converting to registered notes, SmartFinancial aims to enhance liquidity and attractiveness for potential investors by removing transfer restrictions associated with the Old Notes, which are not listed on any national securities exchange.
The terms of the New Notes are identical to those of the Old Notes, except for their registered status, which allows for easier trading and eliminates certain registration rights previously associated with the Old Notes. Following the completion of the exchange offer, all validly tendered Old Notes will automatically be exchanged for an equivalent principal amount of the New Notes.
For investors, this exchange offer could represent a positive development as it simplifies the company's capital structure and may attract more institutional investors who prefer registered securities. However, the lack of established trading for both the Old and New Notes may limit immediate market interest.
In terms of regulatory considerations, this exchange offer must comply with SEC regulations, particularly those tied to the Securities Act of 1933, ensuring that all necessary disclosures are made to potential investors. SmartFinancial has indicated its commitment to meeting all regulatory requirements throughout this process.
In conclusion, SmartFinancial's exchange offer reflects a strategic move to enhance its capital structure and investor appeal, while also fulfilling its regulatory obligations. Stakeholders will be keenly awaiting the completion of this transaction, which is expected to close in 2025 pending all customary conditions being met.