Discover Financial Services ( DFS) on late Monday said it was offering $500 million in common stock, some of which it may use to repay government bailout money.

Discover said the proceeds of the offering would be used for general corporate purposes, which could include capital contributions to its Discover Bank subsidiary, investments in company businesses and the "possible repurchase" of the federal government's $1.2 billion preferred equity investment made in March through the Troubled Asset Relief Program.

Discover follows larger rival American Express ( AXP), which repaid the government's $3.4 billion TARP investment last month. AmEx, one of the 19 largest financial holding companies stress-tested by the government in May, was one of 10 who were found to have adequate capital that have since paid back government investments. Others include JPMorgan Chase ( JPM), Goldman Sachs ( GS), BB&T Corp. ( BBT), State Street ( STT) and Bank of New York Mellon ( BK).

The company also said it "intends to offer senior notes in the near future, subject to market conditions." Raising debt without government assistance is another requirement companies wishing to repay TARP must complete, per Treasury Department guidelines.

J.P. Morgan Securities Inc. is acting as sole book-running manager for both the common stock and proposed senior notes offerings. Discover is granting underwriters a 30-day option to purchase an additional 15% of the number of shares offered to cover overallotments.

Discover shares, which closed up 3.6% to $10.50 Monday, were sliding 8.8% to $9.58 in recent after-hours action.
This article was written by a staff member of TheStreet.com.

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