Fitch Expects to Rate First Tennessee's Senior Debt Issuance 'BBB-'

NEW YORK--()--Fitch Ratings expects to assign a long-term debt rating of BBB-' to First Tennessee Bank, N.A.'s (FTB) $400 million senior debt issuance. The senior notes will mature in 2019 and were priced at a fixed annual interest rate of 2.95%.

FTB intends to use the net proceeds of the offering to repay $304 million of notes maturing in January 2015, and for a dividend to its parent, First Horizon National Corp (FHN).

KEY RATINGS DRIVERS - SENIOR DEBT

FTB's long-term debt ratings are equalized with its long-term IDR (currently 'BBB-') in accordance with Fitch's rating criteria.

FHN is solidly placed in the 'BBB-' rating category due to its strong franchise in the Southeast, its core business lines' abilities to generate reasonable capital and absorb potential litigation risks, and management's efforts to wind down the nonstrategic loan portfolio while minimizing losses. Fitch believes FHN's ratings are constrained to their current level over the long-term given additional legal overhang associated with the company's former legacy business strategy as well as its tepid consolidated earnings performance. Furthermore, Fitch believes that FHN's asset quality will continue to lag higher-rated peers given the sticky nature of its nonperforming assets.

RATING SENSITIVITIES - SENIOR DEBT

FTB's senior debt ratings are sensitive to changes to its long-term IDR. Rating sensitivities for the IDR include the potential impact of legal overhang on earnings and capital (a negative sensitivity) and the ability to maintain capital at adequate levels, reasonably manage legal risk and improve earnings performance (a positive sensitivity).

FTB's long-term IDR is currently 'BBB-' and was last affirmed on Feb. 5, 2014 following Fitch's mid-tier regional bank peer review.

FTB is a wholly owned subsidiary FHN. FTB's ratings are aligned with FHN's reflecting Fitch's view that the bank subsidiary is core to the franchise

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' (Jan. 31, 2014);

--'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles' (March 27, 2014);

--'U.S. Banking Quarterly Comment: 3Q14 (Fighting Against the Current of Low Interest Rates)' (Oct. 27, 2014);

--'Index Trend Analysis - 2Q14 (Fitch Fundamentals Index Falls to Neutral)' (July 15, 2014);

--'Risk Radar Global 3Q14' (Sept. 15, 2014);

--'2015 Outlook: U.S. Banks (Growth in a Challenging Rate Environment)' (Nov. 12, 2014);

--'U.S. Banks: Mid-Tier Regional Bank Guide (Weak Core Profitability Awaiting Reprieve from Low Rates)' (June 26, 2014).

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=925435

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Contacts

Fitch Ratings
Primary Analyst
Bain K. Rumohr, CFA
Director
+1-312-368-3153
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Julie Solar
Senior Director
+1-312-368-5472
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1-212-908-0771
or
Media Relations:'
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Bain K. Rumohr, CFA
Director
+1-312-368-3153
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Julie Solar
Senior Director
+1-312-368-5472
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1-212-908-0771
or
Media Relations:'
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com