Auction of Comerica warrants brings in $181.1M
Published 6:53 am Friday, May 7, 2010
WASHINGTON — A sale of warrants of the Texas banking company Comerica Inc. has brought the government $181.1 million in the latest move to recoup costs for taxpayers from the $700 billion financial bailout fund.
The Treasury Department said today it sold 11.5 million warrants at a price of $16 per warrant. It said the $181.1 million was its estimate of what the net proceeds would be to the government from the sale.
Financial institutions have been eager to cut all ties to the bailout program, known as the Troubled Assets Relief Program or TARP, to escape various restrictions imposed on the banks receiving the support including limitations on executive compensation.
The $16 price price received at the auction, which was held Thursday, was just above the $15 minimum bid price which had been set by Treasury.
Warrants are financial instruments that allow the holder to buy stock at a fixed price. The government received the warrants as part of the compensation for providing support to banks during the financial crisis.
The Comerica warrants give the holders the right to buy an equal amount of shares of Comerica stock at a price of $29.40.
The auction price of $16 means that the stock would need to be selling above $45.40 for the warrants to be “in the money” in terms of recouping the $16 price paid for the warrant and the option price of $29.40 on the stock.
Comerica shares fell $1.04, or 2.5 percent, to $40.39 in pre-opening trading.
Comerica, which has its headquarters in Dallas, received $2.25 billion from the bailout program in November 2008 at the height of the financial crisis.
The Comerica warrant auction followed an auction held last week for PNC Financial Services Group Inc. That auction of 16.9 million PNC warrants raised $320.3 million for the government.
Treasury has said it will conduct warrant auctions for six banks this spring. In addition to Comerica and PNC. it will auction warrants it holds for Wells Fargo &Co. Valley National Bancorp, Sterling Bancshares Inc. and First Financial Bancorp.
