Summary
Capital One Financial Corporation (COF) announced on November 18, 2008, a significant capital infusion from the U.S. Department of the Treasury as part of the Troubled Asset Relief Program (TARP). The company issued $3.56 billion in Fixed Rate Cumulative Perpetual Preferred Stock, Series A, to the Treasury. This preferred stock carries a dividend rate of 5% for the initial five years, increasing to 9% thereafter, and is generally non-voting. In conjunction with the preferred stock issuance, the Treasury Department received a warrant to purchase approximately 12.66 million shares of Capital One common stock at an exercise price of $42.13 per share, with a ten-year expiration. This issuance is intended to strengthen Capital One's capital position amidst the challenging economic environment of late 2008. The agreement includes certain restrictions on Capital One's ability to increase common stock dividends or repurchase shares without Treasury consent, as well as limitations on executive compensation.
Key Highlights
- 1Capital One received $3.56 billion in capital from the U.S. Treasury through the issuance of Series A Preferred Stock.
- 2The Series A Preferred Stock has a liquidation preference of $1,000 per share and pays cumulative dividends starting at 5% annually, increasing to 9% after five years.
- 3The U.S. Treasury received a warrant to purchase 12,657,960 shares of Capital One common stock with an exercise price of $42.13.
- 4The warrant has a ten-year expiration and includes provisions for adjustments to the exercise price and number of shares.
- 5Treasury consent is required for Capital One to increase common stock dividends or repurchase common stock for the first three years, unless the preferred stock is redeemed.
- 6Certain restrictions on executive compensation and benefit plans are imposed in compliance with the Emergency Economic Stabilization Act of 2008 (EESA).
- 7Both the preferred stock and warrant are accounted for as Tier 1 capital for regulatory purposes.