The U.S. Treasury will earn $146.5 million from the auction of Capital One’s stock warrants, an arrangement that stems from the initial bailout of the banking giant.
“The net proceeds to Treasury from the offering are expected to be approximately $146,500,064.55,” read a Treasury statement today. “These proceeds provide an additional return to the American taxpayer from Treasury’s investment in the Company beyond the dividend payments it received on the related preferred stock.”
The Treasury said today it priced the warrants at $11.75 each in yesterday’s auction of nearly 12.7 million Capital One stock warrants. Treasury officials have not released names of corporate or individually placed bids. Capital One disclosed in a security filing on Tuesday that it may bid on the warrant, but there is no confirmation of the bank doing so.
The auction marked the first sale of assets for the U.S. Treasury under the bailout program. Capital One, one of the major credit card issuers, received $3.55 billion in taxpayer funds last year. The Treasury, in return, acquired stock warrants and preferred shares after Capital One was crippled by huge credit card losses.
Shares of Capital One stock were trading well above $37 in late morning today. The warrants, which expire in 2018, give the holder the right to buy Capital One shares at an exercise price of $42.13.
The Treasury also has plans to auction off its warrant positions in JPMorgan Chase & Co, the nation’s top credit card issuer, and TCF Financial Corp. All three banks have fully repurchased the Treasury’s investment in preferred stock. The Treasury said it will have no remaining holdings in the banks if the warrants are sold.
Financial giant Bank of America said this week it will repay the $45 billion it received in taxpayer funds as part of the Troubled Asset Relief Program.
BofA, the second-largest credit card issuer, said it has already paid $2.54 billion in dividends to the Treasury on the TARP investment. And repaying the Treasury will save the company about $3.6 billion in annual dividend costs.
Bank of America will use proceeds from the sale of $18.8 billion of “common equivalent securities.” The remainder will be repaid with $26.2 billion in cash.
See today’s Featured Credit Card Offers
