Treasury announces auction of 272 million Bank of America stock warrants on Wednesday

Treasury sets Bank of America warrant sale date

WASHINGTON — The Treasury Department said Monday it will auction 272 million warrants for Bank of America stock to recoup taxpayer money from the controversial financial bailout fund.

Treasury said the auctions will take place on Wednesday and will be divided into two classes of warrants. Warrants are financial instruments that allow the holder to buy stock in the future at a fixed price.

Bank of America Corp. repaid the government $45 billion in December as part of its efforts to sever ties with the $700 billion bailout program. The auction of the warrants is taking place because Bank of America and the Treasury Department could not agree on a price for the warrants.

Treasury said that 150.38 million warrants, which it labeled “A warrants,” would carry a minimum bid price of $7 per warrant. It said that another 121.79 million warrants, designated “B Warrants,” would carry a minimum bid price of $1.50 per warrant.

The auction, which will be conducted by Deutsche Bank Securities Inc., will begin at 8 a. m. EST Wednesday and will close at 6:30 p.m. EST the same day.

Bank of America, based in Charlotte, N.C., got $25 billion from the government’s Troubled Assets Relief Program in October 2008 at the height of the financial crisis and then another $20 billion in January 2009 to help offset losses it absorbed as part of its acquisition of Merrill Lynch.

Last week, Bank of America’s shareholders approved an increase in the number of the bank’s common shares to fund repayment of the government bailout money. Bank of America, like other financial institutions, has been eager to repay its bailout money to avoid executive compensation restrictions imposed by government pay czar Kenneth Feinberg.

The administration in January reported to Congress that it had made $4 billion from the sale of the warrants with $2.9 billion of that coming from 31 institutions that repurchased their own warrants and the other $1.1 billion coming from three auctions that were held last year. Those auctions, including one for JPMorgan Chase & Co., were held after Treasury and the banks involved could not reach agreement on a price for the warrants.

In addition to Bank of America, Treasury has said it will hold auctions over the next month for three other banks including Washington Federal Inc. of Seattle; Texas Capital Bancshares Inc., based in Dallas, and Signature Bank, headquartered in New York City.