The government has received $320.3 million from the sale of warrants it held from PNC Financial Services Group Inc. as part of the support it provided the bank during the financial crisis.
The Treasury Department said Friday that it sold 16.9 million warrants in an auction with a sales price of $19.20 per warrant. Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price.
Financial institutions have been eager to cut all ties to the $700 billion bailout program, known as the Troubled Assets Relief Program, to escape various restrictions imposed on institutions receiving government support including limitations on executive compensation.
PNC, which is based in Pittsburgh, received $7.6 billion in government support from the bailout fund in December 2008.
The $19.20 auction price was above the $15 per warrant minimum bid price that had been set by Treasury.
The PNC warrants give the holders an option to buy an equal amount of shares of PNC stock at a price of $67.63. The warrants expire in December 2018.
The auction price of $19.20 for the warrants means that PNC stock would need to climb to $86.83 for the holder of the warrant to be "in the money" in terms of recouping the $19.20 price paid for the warrant and the option price on the stock of $67.63 per share.
PNC stock rose $1.10, or 1.7 percent, to $67.16 in morning trading Friday.
Linus Wilson, a finance professor at the University of Louisiana at Lafayette, said that the latest results showed that Treasury is continuing to have success using the auctions to get better prices for taxpayers than the government would have received through negotiations with the company on a price for the warrants.
PNC is the first warrant auction among a group of six banks that includes Wells Fargo & Co., Comerica Inc., Valley National Bancorp, Sterling Bancshares Inc. and First Financial Bancorp.
Treasury has not announced the specific dates for the remaining five auctions but has said it expects to complete all of them within the next six weeks.
The warrant auctions are held when Treasury and the banks cannot agree on a price for the warrants. The warrants are designed to give taxpayers an additional return on the government's investment.
On Monday, Treasury announced that it had authorized the start of sales of the first 20 percent of the 7.7 billion shares of Citigroup stock that it owns. The government received those shares last summer for a purchase price of $25 billion or $3.25 per share.
No comments:
Post a Comment