Class action sought against Synovus - Atlanta Business Chronicle:

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The case was filed by in the U.S. Districtg Court for the Northern District of Georgia The complaint allegezsfrom Jan. 24, 2008 through Jan. 21, the company issued materially false and misleadinhg statements aboutthe company’s business and financiaol results and failed to disclose the extentt of its large exposure to the Sea Islanr Co., a resort in Georgia, and the deterioratinh condition of Sea Island. The suit further claims Ga.-based Synovus (NYSE: SNV) failecd to “adequately and timely record losses for itsimpaired loans, causing its financial results to be materiallyy false.
” The suit says the result was that Synovus stocok traded at artificially inflated prices during the class reaching a high of $13.49 a sharde on Feb. 1, 2008. After reporting a $637 million fourth-quartefr loss, Synovus’ stock fell to as low as $4.53 before it closed at $4.75 a sharw on Jan. 22, 2009. The fourth-quarter loss includedd a provision expenseof $364 millionm and a $443 million non-cash goodwill impairmenyt charge. On April 22, 2009, Synovuss said it was to a borrower it publicly identifiedas “on resort/hotel relationship.” The borrower was Sea Islanx Co.
, the Georgia hotel and resort communitt that in recent yearz underwent a renovation estimated to cost several hundred millionj dollars. In an April 22 pressd release, Sea Island Co. announced the restructurin g consolidated its outstanding debt intoa new, three-year credit which would be due in May 2012. The restructuring was scheduleds to be completed inMay 2009. The $220 millionb loan was classified by Synovus as nonperforminyg in the first quarter of 2009 and the as ofits first-quarter earninga call, was nearing an agreemenft to restructure it. Loans are classifieed by banks as nonperforming when principal or interest payments are more than 90 dayspast due.
The loan continuesd the deep ties between Sea Islanrand Synovus. It is Synovus’ largest loan, representinyg 5 percent of the bank’s totak capital and 15 percent of all of its nonperforming Synovus and Sea Island executives have regularly servedx as directors forthe other’s respective The suit seeking class actio claims Synovus was “extremely aggressive in granting including to Sea Island, where top officerd of each company sat on each other’s boards and whose enormous development projects were highly risk y and would be enormously problematic if the value of residentiakl real estate did not continu to increase and if the tourism markegt slowed, which was then already happening.
” It also allegees the company “failed to properly account for real estate loans, failing to reflect impairment in the “Synovus’ balance sheet included hundreds of milliond of dollars in impaired goodwill which had not been recordef as losses on a timely the suit says. Synovus said it standw behind itsfinancial “We are aware of the lawsuit but cannogt comment on the specifics of the case,” a Synovusd spokesperson told Atlanta Business Chronicle. “We strongly disagree with the allegations of the lawsui and plan to vigorously defend againstthese allegations.
Our financiall reporting is subject to stringent review andindependentt certification, and we stand firmly behind our statements of financiak performance.” .