In a significant corporate action, SmartFinancial Inc. (Ticker: SMBK), based in Knoxville, Tennessee, has filed a registration statement with the SEC to initiate an exchange offer for its subordinated notes. This transaction involves exchanging up to $100 million in aggregate principal amount of 7.25% Fixed-to-Floating Rate Subordinated Notes due 2035, referred to as "New Notes," for any and all outstanding unregistered 7.25% Fixed-to-Floating Rate Subordinated Notes due 2035, labeled as "Old Notes."
The exchange offer is set to expire at 5:00 p.m. New York City time on a date to be determined in 2025, unless extended. SmartFinancial will not receive any cash proceeds from this exchange, and the transaction is not expected to increase its overall debt load. Instead, this exchange will satisfy the company’s obligations under a registration rights agreement made with purchasers of the Old Notes during their private placement on August 20, 2025.
The strategic rationale behind this exchange offer is to enhance liquidity and improve the accessibility of the company’s debt instruments. By converting Old Notes into New Notes, SmartFinancial is aiming to eliminate transfer restrictions prevalent in the Old Notes and provide a more streamlined debt structure, thereby potentially attracting a broader range of investors. The New Notes will be registered under the Securities Act and will not have the same registration rights as the Old Notes, which are currently not listed on any national securities exchange.
Shareholders and employees might experience a more favorable outlook as this move could reflect positively on SmartFinancial’s financial health and operational flexibility. However, there remains no established trading for either the Old Notes or New Notes, which may limit immediate market impact.
The transaction does not appear to face significant regulatory hurdles, as it is primarily a matter of internal refinancing rather than a merger or acquisition that could raise antitrust concerns. The company has emphasized that all validly tendered Old Notes will be exchanged for an equal principal amount of New Notes upon expiration of the offer.
In conclusion, SmartFinancial Inc.'s exchange offer represents a strategic initiative aimed at refinancing its debt obligations to foster greater investor confidence and financial adaptability, with the potential to enhance shareholder value in the long run.