Trading volume on shares of Hartford Financial (NYSE: HIG) surged on Thursday following the insurer’s pricing of its secondary stock offering. The offering is part of Hartford’s plan to raise capital in order to payback taxpayer money, a plan it announced yesterday.
Hartford, along with many other insurers received government aid following the bailout of AIG. The company risked possible liquidity failure when money markets were teetering as investors’ yanked cash from their accounts following the collapse of firms, such as Lehman Brothers.
“We appreciate the critical role the government and the American taxpayers have played in stabilizing the financial markets and we are pleased to announce a plan to repurchase Treasury’s investment in fewer than 10 months,” said Liam E. McGee, The Hartford’s Chairman, President and Chief Executive Officer.
The capital raise consists of a 52.3 million share common stock offering, priced at $27.75. Hartford is also issuing new debt notes to raise capital. The offering aims to raise an additional $1.1 billion through the sale of $300 million in five-year notes, $500 million in 10-year notes and $300 million in 30-year bonds.
The company plans to use the proceeds from the offering to repurchase the preferred shares the Treasury Department holds once it has received approval to do so.
Following the repayment, the U.S. Treasury Department will continue to hold warrants to purchase approximately 52 million shares of The Hartford’s common stock at an initial exercise price of $9.79 per share.
Though many companies have negotiated a price to repurchase warrants back from the Treasury, Hartford said it does not intend to repurchase the warrants.
The Treasury will likely auction off the Hartford warrants to help recover additional taxpayer money, as they have done with other financial institutions that did not repurchase them.
