Early Wednesday, the Memphis-based financial holding company said it plans to conduct a public offering of its senior notes as part of a equity/debt plan to pay off the $866.5 million it got from the U.S. Department of Treasury under the Troubled Asset Relief Program in 2008.

First Horizon did not indicate the size of the debt offering, but in a research note Morgan Keegan & Co. Inc. senior bank analyst Bob Patten put the figure at $400 million Wednesday morning when he upgraded the company’s shares.

“We believe the announcement to repay TARP (expected to close by Dec. 17) removes a major overhang from the shares, and should reduce the concern among investors that the potential risk to earnings due to mortgage putbacks would hamper management’s ability to capitalize on growth opportunities,” Patten wrote. “The completed capital raise, which moves the already above-average capital ratios even higher, provides significant options for capital deployment with the company indicating a return to a cash dividend in 2011 along with share buybacks (subject to regulatory approval) while pursuing strategic acquisitions in a disciplined manner.”

Along with repurchasing the Treasury-issued preferred stock, the company plans to use the net proceeds of the debt and equity offering to payoff $103 million of its 8.07 percent Junior Subordinated Deferrable Interest Debentures, Series A.

Early Wednesday, the Memphis-based financial holding company said it plans to conduct a public offering of its senior notes as part of a equity/debt plan to pay off the $866.5 million it got from the U.S. Department of Treasury under the Troubled Asset Relief Program in 2008.

First Horizon did not indicate the size of the debt offering, but in a research note Morgan Keegan & Co. Inc. senior bank analyst Bob Patten put the figure at $400 million Wednesday morning when he upgraded the company’s shares.

“We believe the announcement to repay TARP (expected to close by Dec. 17) removes a major overhang from the shares, and should reduce the concern among investors that the potential risk to earnings due to mortgage putbacks would hamper management’s ability to capitalize on growth opportunities,” Patten wrote. “The completed capital raise, which moves the already above-average capital ratios even higher, provides significant options for capital deployment with the company indicating a return to a cash dividend in 2011 along with share buybacks (subject to regulatory approval) while pursuing strategic acquisitions in a disciplined manner.”

Along with repurchasing the Treasury-issued preferred stock, the company plans to use the net proceeds of the debt and equity offering to payoff $103 million of its 8.07 percent Junior Subordinated Deferrable Interest Debentures, Series A.

Shares of First Horizon (NYSE: FHN) were up 19 cents, or about 2 percent, to $10.65 in early trading Wednesday. Volume was light.

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