Investing

Capital One Warrants Pay Back Taxpayers


By Peter Eichenbaum

(Bloomberg) — Capital One Financial Corp. (COF) warrants held by the U.S. government's bank bailout program sold for $146.5 million in the first auction designed to reward taxpayers for helping rescue the financial system.

The 12.7 million warrants given to the Treasury Department's Troubled Asset Relief Program last year sold for $11.75 each, the department said today in a statement. Linus Wilson, an assistant finance professor at the University of Louisiana at Lafayette who tracks TARP returns, had estimated the warrants were worth $227 million to $376 million.

The closing is scheduled on or about Dec. 9, the Treasury said in a statement released today. The auction concluded the Treasury's remaining investment in Capital One, it said.

The Treasury demanded warrants from banks that took bailout funds as part of the price for bolstering them during the credit crisis. The warrants give investors the right to buy common shares in the McLean, Virginia-based credit-card lender at $42.13 until Nov. 14, 2018.

An auction was set after the agency and Capital One couldn't agree on a price for selling the warrants back to the firm, which had the right of first refusal. The Treasury said Nov. 19 it also will auction warrants in New York-based JPMorgan Chase & Co. (JPM) and TCF Financial Corp. (TCB), based in Wayzata, Minnesota. All three previously bought back preferred stock sold to the Treasury.

Capital One closed at $36.92 in New York Stock Exchange composite trading yesterday before the auction was concluded, up 16 percent for 2009.

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

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