Treasury Sells Signature Warrants

The Treasury announced Thursday that it has received net proceeds of $11.2 million from the sale of warrants it obtained as part of its investment in New York-based Signature Bank (SBNY - Snapshot Report) through the Troubled Asset Relief Program (TARP) during the height of the financial crisis. In Mar 2009, Signature had repaid the entire $120 million of bailout money it had received from the government in Dec 2008.
 
The Treasury auctioned 595,829 warrants at $19.00 each. The final price was above the floor price of $16 per warrant set by Treasury. The Signature warrants have a strike price of $30.21 and expire in Dec 2018.
 
The current move will completely free Signature from government intervention. The auction for Signature warrants follows the sale of Washington Federal Inc.’s (WFSL) warrants on Wednesday and Bank of America Corp.'s (BAC - Analyst Report) warrants last week. The government received net proceeds of $15.4 million from the sale of Washington Federal warrants and a record $1.5 billion from the sale of Bank of America warrants.
 
The amount received from the auction of Bank of America warrants exceeds $1.1 billion raised from the sale of Goldman Sachs (GS - Analyst Report) warrants earlier.
 
Following Bank of America and Washington Federal, Signature is the third among four banks whose warrants are scheduled to be sold via auctions this month. The bank remaining is Texas Capital Bancshares (TCBI - Analyst Report). The Treasury has already started auctioning 758,086 warrants of Texas Capital at a floor price of $6.50 each. At the floor price, gross proceeds from the sale would be $4.9 billion.
 
In similar transactions during Dec 2009, the Treasury received $1.1 billion from the sale of warrants of JPMorgan Chase & Co. (JPM - Analyst Report), Capital One Financial Corp. (COF - Analyst Report) and TCF Financial Corp. (TCB - Snapshot Report). The government expects to conduct similar auctions in the future for other warrants it holds in approximately 252 banks.
 
We think that the repayment of government money and repurchase of warrants can be viewed as a sign of recovery of the institutions as well as the economy. According to the Treasury, losses on TARP investments are likely to be significantly trimmed with the improvement in the overall financial condition.
 

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