Treasury to Sell Comerica Warrants – Analyst Blog

Yesterday, the U.S. Treasury announced that it will auction warrants of Comerica Inc. (CMA) this week. The Treasury will auction 11.48 million warrants of Comerica on Thursday. The minimum bid price is set at $15 per warrant. This move will completely free Comerica from government intervention.

 

The offering is expected to be priced through a modified Dutch auction. Deutsche Bank Securities Inc., a division of Deutsche Bank AG (DB) is the sole book-running manager. 

 

The Treasury received these warrants as part of its investment in Comerica through the Troubled Asset Relief Program (TARP) during the height of the financial crisis. In March 2010, Comerica repaid the entire $2.25 billion of bailout money it had received from the government.

 

The repayment of TARP loans followed Comerica’s completion of an $880 million common stock offering earlier in March 2010. Comerica funded the repayment with a combination of cash from its corporate fund and a sale of common stock.

 

Last week, the Treasury auctioned 16.9 million warrants of PNC Financial Services Group Inc. (PNC), raising $320.3 million for the government. Besides Comerica and PNC Financial, the Treasury will also auction warrants of Wells Fargo & Co. (WFC), Valley National Bancorp (VLY), Sterling Bancshares Inc. (SBIB) and First Financial Bancorp (FFBC) in the coming days.

 

In March 2010, the Treasury sold warrants in Bank of America Corp. (BAC), Washington Federal Inc. (WFSL), Texas Capital Bancshares Inc. (TCBI) and Signature Bank (SBNY).

 

The government received net proceeds of $11.2 million from the sale of Signature warrants, $15.4 million from Washington Federal warrants, $6.6 million from the sale of Texas Capital warrants and a record $1.5 billion from the sale of Bank of America warrants.

 

In similar transactions in December 2009, the Treasury received $1.1 billion from the sale of warrants of JPMorgan Chase & Co. (JPM), Capital One Financial Corp. (COF) and TCF Financial Corp. (TCB).

 

The repayment of the bailout money coupled with the repurchase of warrants is encouraging and can be seen as an indication of recovery of financial institutions and the economy as well.

 

Shares of Comerica decreased $1.07 or 2.48% to $42.08 during Tuesday’s regular trading on the New York Stock Exchange.