NEW YORK (
's debt to
TARP repayment plans and pressure its share price in the near term, according to comments by a Prudential executive on Thursday.
Prudential Vice Chairman Mark Grier said at an investor conference that his company still expects to receive somewhere in the neighborhood of $5 billion from Wachovia to extinguish a joint venture, according to media reports. The amount is still being negotiated, and Grier hinted at some disagreement between the two firms, saying "Wells has their own opinion" about the value.
In any event, there is a possibility that Wells may pay some or all of the Wachovia debt through stock issuance. Grier said that Prudential would seek to unload those shares into the market quickly, something that could pressure Wells Fargo's stock price.
"We do not intend to be long-term holders," he said, according to
However, Grier went on to note that there would be "some logistics and execution mechanics that we will be going through" to exit the position, indicating that Prudential might not dump the stock all at once.
The $5 billion debt also represents a potential roadblock in Wells Fargo's efforts to pay back $25 billion in bailout funds. The bank has been discussing repayment options with regulators for quite some time, but may ultimately be the last of the "Big Four" -- including
Bank of America
-- to announce definitive plans to pay back TARP.
CEO John Stumpf said earlier this week he's eager to return the Treasury's investment "as soon as practical" with as
little shareholder dilution as possible. However, Wells' capital metrics are among the lowest of its big bank brethren, and the $5 billion Prudential debt due at the start of 2010 won't help matters much.
The $5 billion payment -- which Grier referred to as "the famous Wachovia put" -- stems from a joint venture to combine the retail brokerage operations of Wachovia and Prudential in 2003. The timing of the payment was decided upon when Wachovia acquired the brokerage A.G. Edwards in 2007.
Wells Fargo shares were recently down 1.1% at $25.66.
-- Written by Lauren Tara LaCapra in New York