Treasury to Divest Bank Warrants

WASHINGTON, D.C. (TheStreet) -- The Treasury Department is planning to hold public auctions to dispose of its remaining warrant positions in JPMorgan Chase (JPM Quote), Capital One (COF Quote) and TCF Financial (TCB Quote).

The three banks have all previously repaid funds received under the Troubled Asset Relief Program, or TARP.

Over the next month, the Treasury Department intends to conduct public Dutch auctions to sell the warrant positions, which were granted as part of the bailout of the companies during the financial crisis.

The proceeds of these sales will provide "an additional return to the American taxpayer from Treasury's investments in these banks beyond the dividend payments it received on the related preferred stock," the government said in its statement late Thursday.

The Treasury Department intends to sell the warrants through registered public offerings. These offerings will be executed using a modified Dutch auction methodology that establishes a market price by allowing investors to submit bids at specified increments above a minimum price determined for each auction.

More detailed guidance for the auctions will be available in prospectuses that will be filed by the warrant issuers prior to the opening of each auction. The Treasury Department expects to conduct similar auctions in the future for other warrant positions it holds in banks that have repaid Capital Purchase Program investments.

Goldman Sachs (GS Quote), American Express (AXP Quote) and U.S. Bancorp (USB Quote) are among the firms that have already paid back the warrants associated with the government's preferred investment. JPMorgan explored repurchasing the warrants, but could not agree on a price with the government. In July, the company waived its right to buy the warrants , allowing the Treasury to auction them.

The government has chosen Deutsche Bank Securities, a unit of Deutsche Bank (DB Quote) as the auction agent and sole book running manager for the offerings.

Shares of JPMorgan Chase closed down 1.9% at $42.55 on Thursday. Capital One's stock fell 5.2% to $38.34, while TCF shares rose modestly.

--Written by Laurie Kulikowski in New York.