As part of the bailout funds repayment by the insurers through the Troubled Asset Relief Program (TARP), the US Treasury Department plans to conduct auctions to dispose of its remaining warrants held in Lincoln National Corporation (LNC) and Hartford Financial Services Group Inc. (HIG).
During the recession of 2009, the US Treasury provided financial aid to many banks and financial institutions and received warrants in exchange. A warrant gives the purchaser the right to buy common stock at a fixed price or sometimes at steep discounts. For companies that have repaid their TARP, the Treasury is now providing an option to buy back the warrants at a negotiated price.
The Treasury plans to sell 52.09 million Hartford warrants and 13.05 million Lincoln warrants in the auction. The Hartford warrants come at a fixed price of $9.79 per share and the Lincoln warrants are available for $10.92 each.
The warrants will be sold at public auctions over the next several weeks, with Deutsche Bank Securities Inc., an arm of Deutsche Bank AG (DB), acting as the government’s auction agent and the sole book running manager.
Besides the liberation from pay restrictions and government intervention in the internal affairs of the companies, these warrant sales will provide an additional return to the American taxpayer from the Treasury’s investments in these financial institutions.
Through the TARP, the US government had provided billions of dollars of support to several banks and other major insurance companies to help them shore up their capital positions in the wake of major investment losses.
Among the major life insurance companies, Hartford received $3.4 billion in government aid on June 26, 2009, which it repaid on March 31, 2010. Lincoln National received $950 million from the bailout fund on July 10, 2009, repaying in full on June 30, 2010. Only American International Group Inc. (AIG) is left to pay its remaining $132 billion out of the $182.3 billion provided at the peak of the economic meltdown.
AMER INTL GRP (AIG): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis Report
HARTFORD FIN SV (HIG): Free Stock Analysis Report
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
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