The U.S. Treasury Department said on Friday it has sold nearly 18 million warrants in SunTrust Banks as the government winds down its $700 billion Wall Street bailout. One of the key buyers was the Atlanta-based bank itself.
Treasury said the net proceeds from the SunTrust warrants were $30.1 million. Warrants grant the holder the right to buy shares at a certain price for a set period of time.
In March, SunTrust repaid $4.85 billion in aid it received during the financial crisis. SunTrust also issued the Treasury warrants for stock during the crisis so taxpayers could benefit as the market recovered and share prices improved.
If the warrants are ever exercised, the shares could potentially dilute the value of SunTrust investors' stock.
SunTrust bought back slightly more than 4 million A-series warrants for $10.8 million or $2.70 each. The auction is set to close on or before Wednesday.
SunTrust Chief Financial Officer Aleem Gilliani described the bank's purchases in a news release as "a good investment" that would help avoid potential shareholder dilution.
The two series of warrants have initial exercise prices at $44.15 per share and $33.70 per share, respectively into 2018. They sold at auction for $1.20 and $2.70, respectively, per share.
Renewed fears of a double-dip recession have battered bank stocks. SunTrust closed up 3 cents at $16.97 Friday, but its shares are down around 35 percent since early July.
Linus Wilson, finance professor at the University of Louisiana at Lafayette, said he was surprised that, given market turmoil, the government picked now as the time to sell.
“I didn’t see the rush in this case,” Wilson said.
More than two dozen Georgia banks received government crisis aid. The largest yet to re-pay is Columbus-based Synovus Financial, which received nearly $1 billion in assistance.
The government distributed $413 billion of $700 billion authorized by Congress to rescue banks, automakers and troubled insurer AIG.
So far, $315 billion has been repaid. The program remains nearly $100 billion in the red, mostly because of money that hasn't been repaid by AIG and the automakers. The federal investment in banks actually has returned a modest profit, including interest and dividends paid.
The Associated Press contributed to this report.
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