WASHINGTON — A sale of Sterling Bancshares Inc. warrants has brought the government $2.86 million in the latest move to recoup costs for taxpayers from the $700 billion financial bailout.
The Treasury Department said today it sold 2.62 million warrants at a price of $1.15 per warrant. The government had set a minimum bid price of 85 cents per warrant for the auction, which was held Wednesday. A warrant gives the purchaser the right to buy common stock at a fixed price.
The government obtained the warrants when it provided Sterling Bancshares with $125.2 million at the height of the financial crisis in December 2008. The Houston-based bank repaid its bailout in May 2009.
Financial institutions have been eager to cut ties to the bailout program, known as the Troubled Asset Relief Program, or TARP, to escape various restrictions imposed on banks receiving support. Those include limits on dividend payments and executive compensation.
The government received the warrants as a bonus to taxpayers for rescuing the banks during the financial crisis.
By purchasing the warrants, holders have the right to buy an equal amount of shares of Sterling Bancshares at a price of $7.18 per share.
The auction price of $1.15 means that the stock would need to be selling at $8.33 per share for an investor to recoup the $1.15 paid for the warrant and the option price of $7.18 for the stock.
Sterling Bancshares stock closed in trading Wednesday at $5 per share. Over the past year, the bank’s stock has ranged from a low of $4.50 a share to a high of $8.69 per share.
Last week, the government raised $2.97 million through an auction of 465,117 warrants of Cincinnati-based First Financial Bancorp. Those warrants sold for $6.70 per warrant.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
