Bank of America (NYSE: BAC) announced late Wednesday that it has completed its repayment of government funds received from the Troubled Asset Relief Program (TARP). The bank sent the U.S. Treasury Department a $45 billion payment to settle up its debt.
As previously planned, Bank of America helped fund the repayment by selling common equivalent securities for total proceeds of $19.29 billion. Those securities, which convert into common stock, were priced at $15 per equivalent.
The proceeds from the equity sale combined with existing cash the bank held enabled it to repurchase all the preferred stock the U.S. Treasury held in exchange for the TARP money.
Bank of America also made a dividend payment on the preferred shares to the government totaling $190 million. That brought total dividend payments on the government’s investment to roughly $2.7 billion.
“Now that we have cleared this significant hurdle, which demonstrates the strength of our company, we look forward to continuing to play a key role in the economic recovery and helping to meet the changing needs of our customers and clients,” added Lewis.
All told, the bank repurchased 1.8 million shares of fixed rate preferred and perpetual preferred stock from the U.S. Treasury.
Bank of America’s repayment of TARP certainly helps investor opinion on the bank, as it can now prove it is self-sufficient again. More importantly though, is the release from the government’s pay restrictions that came with the borrowed funds.
The banks search for a new Chief Executive has been hampered by questions of pay restrictions and other government rules, leaving many candidates questioning their desire for the role.
Current CEO Kenneth Lewis has previously announced he will step down on December 31, 2009.
