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Investments / Lending / The Ticker

Treasury works to wind down TARP bank investments

Treasury announces $129.1 million in proceeds from pricing of auctions

Bank

In an effort to wind down the remaining Troubled Asset Relief Program, the Treasury priced auctions of preferred stock and subordinated debt in the following five institutions: Community Pride Bank Corporation; First Banks, Inc.; First Intercontinental Bank; Universal Bancorp; and Virginia Company Bank.

TARP story

Treasury sold an estimated 96% of its shares of fixed-rate cumulative perpetual preferred stock, Class C, of First Banks, Inc., as Treasury failed to receive sufficient bids above the minimum price for the security in accordance with the auction procedures.

In order to protect taxpayer interests, a minimum price was set by Treasury for each security as part of the auctions. Aggregate gross proceeds from the auctions to Treasury are expected to be approximately $129.1 million.

“The TARP bank programs helped prevent a collapse of our financial system, and our economy is in a stronger position today because of the forceful action the government took,” said Assistant Secretary for Financial Stability Timothy Massad. 

“Moreover, this latest round of auctions puts taxpayers one step closer to fully winding down these programs, which have resulted in a gain of more than $27 billion to the taxpayers,” he added.

Taxpayers have already benefited greatly from TARP’s bank programs. In fact, including the forecasted proceeds from the transactions announced today, Treasury has recovered more than $272 billion from TARP’s bank programs via repayments, dividends, interest and other income. This compares to the $245 billion initially invested.

Of the repayments, approximately $2 billion were refinanced under the Small Business Lending Fund (SBLF). Congress, requiring Treasury to let CPP institutions repay TARP funds by borrowing under that program, created the SBLF outside of TARP.

The majority of the funds recovered thus far are from repayments at par, as well as dividends, interest and sales of warrants. Proceeds from CPP preferred stock auctions make up less than 1% of the overall total.

These auctions fall under the strategy that Treasury outlined in May 2012 to help wind down its remaining TARP bank investments in a way that protects taxpayers and preserves the strength of community banks. Treasury made it clear that it plans to use a combination of repayments, restructurings and sales to manage and recover the investments that remain.

The auctions’ closings are expected to happen on or around August 12, subject to customary closing conditions. The offerings were priced via modified Dutch auctions.

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