Capitol One warrant auction puts cash in Treasury

ASSOCIATED PRESS

The Treasury Department said Friday it received $146.5 million for the warrants of Capital One Financial Corp. in the first auction of the warrants the government received as part of the $700 billion financial system bailout.

The auction, conducted by Deutsche Bank Securities Inc. on Thursday, resulted in a price of $11.75 per warrant.

Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price.

Each warrant gives the owner the right to purchase one share of Capital One stock at a price of $42.13. The warrants will expire on Nov. 14, 2018. Capital One stock closed trading Friday at $37.92, up from Thursday’s close of $36.92.

The government had received nearly 12.7 million warrants in return for providing Capital One with $3.56 billion in support from the financial rescue fund in November 2008 at the height of the financial crisis.

The auction was held because McLean-based Capital One and the government could not agree on a price for the warrants after months of negotiations.

Most banks wanted to repurchase their warrants so they would avoid diluting the value of their stockholders’ shares in the future, but the government was concerned that it could be accused of accepting prices that were too low.

The government announced last month that it would also hold warrant auctions for JPMorgan Chase & Co. and TCF Financial Corp.

All three companies have paid back the original support from the government, and the only remaining issue was the disposition of the warrants.