BoA warrant sale date confirmed

The Treasury Department said yesterday that it will move on plans to auction 272 million warrants for Bank of America stock in order to recoup taxpayer money. The auctions will take place tomorrow (3 March) and will be divided into two classes of warrants.

Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price. According to reports by the Associated Press (AP), the auction will be conducted by Deutsche Bank Securities Inc. and will begin at 08:00 EST and close at 18:30 EST the same day.

Bank of America, the US' largest lender, already repaid the government $45 billion in December as part of the firm's ties with the $700 billion bailout program. The AP reports that the auction of the warrants is taking place because Bank of America and the Treasury Department could not agree on a price for the warrants.

Pricing

The two classes of warrants, which the Treasury has labeled as "A warrants" and "B warrants" respectively have both been given a minimum bid price for the auction. "A warrants" - a label which applies to 150.38 million warrants - will each carry a minimum bid price of $7 per warrant; while "B Warrants" - a further 121.79 million warrants - will carry a minimum bid price of $1.50 per warrant.

Bank of America had received $25 billion from the government's Troubled Asset Relief Program (TARP) in October 2008 and then another $20 billion in January 2009 to help offset losses it absorbed as part of its acquisition of Merrill Lynch. And last week Bank of America's shareholders approved an increase in the number of the bank's common shares to fund repayment of the government bailout money.

In addition to the Bank of America auction, the Treasury has said it will hold further auctions over the next month for three other banks, including Washington Federal Inc. of Seattle; Texas Capital Bancshares Inc., based in Dallas, and Signature Bank, headquartered in New York City.

Matthew Buttell

Matt Buttell graduated from Bath Spa University in 2006. Since then he has written for several publications, before moving to the web. He now writes solely for the internet, continuing to cover key business issues while managing his own personal blog.

Related Articles:

AIG sells Asian unit | US Banks lending falls at record pace | Wall Street pushes overdraft fees

Like this article? Get the RSS feed: