Auctioning off the warrants from the TARP bailout funds netted Bank of America $1.57 billion, making it the largest auction of these types of securities ever partaken in by the Treasury Department.
There were two groupings of warrants, appropriately named Group A and Group B Warrants. The Treasury said today that the Group A warrants sold for $8.35 each, with a minimum opening bid of $7. Group B warrants had a minimum opening bid requirement of $1.50, and they sold for $2.55.
After commissions and fees the Treasury Department pocketed $1.54 billion.
To give an idea of the success of the sale, other recent auctions of warrants netted $1.1 billion for Goldman Sachs (NYSE:GS), and one by JPMorgan Chase attracted $950.3 million in December 2009. In the case of Goldman Sachs they bought the warrants back in the middle of the summer of 2009.
So far the Treasury has secured around $5.5 billion from sales of warrants as it attempts to get back the $700 billion in taxpayers’ money provided through the Troubled Asset Relief Program (TARP).
As far as the warrants themselves which were auctioned by Bank of America, the Group A warrants will expire on January 2019 and can be converted to the same amount of common shares in the company for $13.30 each. Group B warrants expire a little sooner in 2018, and can be converted for $30.79 a piece.
With Bank of America, as with other banks, they negotiated with the Treasury to buy back the warrants. Contrary to Goldman Sachs, they weren’t able to come to a figure both parties could agree upon, so the warrants were auctioned, but the bank in that case receives nothing for them; the reason the Treasury received the $1.54 billion after commissions and fees while Bank of America got nothing for them.
