Sometimes it pays to be a little guy. While the nine largest U.S. banks are the most
well-known recipients of the government's largess, there are a good number of smaller financial institutions that received capital from the first tranche of the Treasury's $700 billion Troubled Asset Relief Plan. And as the financial storm set off by Lehman Brothers Holdings Inc. eases, those same smaller banks are quickly raising private capital in order to reduce government ownership of their businesses.
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According to the
Financial Times:
A handful of small banks have raised money in recent weeks from
existing shareholders and private equity firms, and through public
offerings. The range of schemes is indicative of the types of
strategies the rest of the banking industry could pursue in the coming
year.
Why move so quickly? Well, under the terms of the TARP program, if a bank gets up 25% of the money
injected by the Treasury within the first year, the institution
qualifies to have the government's outstanding warrants on the bank reduced by 50%.
However, the only bank to pull it off thus far has been IberiaBank Corp., but it certainly won't be the last. Other banks such as National Penn Bancshares Inc. and Flagstar Bancorp are now attempting it. Flagstar signed a deal with private equity firm MatlinPatterson, which would make a $250 million
investment (for complete terms, Pipeline subscribers can
see them here). And National Penn is encouraging its shareholders to help
it raise the capital through a reinvestment scheme that allows them to
buy new shares at a 10% discount. -
George White
See story from the Financial Times
