Nearly six years after receiving $935 million from the U.S. Treasury through its Troubled Asset Relief Program, Popular Inc. announced Wednesday it has received the go-ahead from regulators to repay the amount.
The bank, which initially filed its application to repay the money in October, was asked to re-submit the paperwork in March to reflect transactions it had completed in recent months, Popular Inc. CEO told this media outlet.
Popular intends to fund the repayment of the TARP funds from a combination of internal liquidity and an issuance of approximately $400 million of debt securities in coming months, Carrión said.
When issued, it would be the first time in several years that Popular would be conducting an emission, he confirmed.
“This is extraordinary because while it is true that when we were allowed into the TARP program in 2008, it was a sign of trust in us, it is also true that we were the bank that owed the most. Frankly, that’s not a list we wanted to lead,” he said.
Meanwhile, Popular intends to redeem its junior subordinated debentures held by Popular Capital Trust III, at a redemption price of 100 percent of the principal amount outstanding, plus accrued and unpaid interest.
The trust will in turn redeem the $935 million of its trust capital securities held by the U.S. Treasury, which were issued in August 2009 in exchange for the 935,000 shares of Popular’s Series C preferred stock initially issued in December 2008 to the U.S. Treasury under the TARP Capital Purchase Program.
After the redemption, Popular intends to repurchase the outstanding warrant initially issued to the U.S. Treasury under the TARP Capital Purchase Program in 2008. The warrant represents the right to purchase 2,093,284 shares of Popular’s common stock at an exercise price of $67 per share with an original term of 10 years.
Popular has notified the U.S. Treasury of its intention to redeem the trust capital securities and repurchase the warrant, both of which are subject to the agency’s approval.
Upon redemption of the junior subordinated debentures, Popular expects to record a non-cash charge to earnings for the unamortized portion of the discount associated with the junior subordinated debentures, which at March 31, 2014 had a balance of $414.3 million.