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August 7, 2009

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US bank buys back warrants

MORGAN Stanley yesterday said it repurchased warrants it issued to the United States government as part of last fall's bank bailout program for US$950 million.

New York-based Morgan Stanley issued the warrants, which could have been converted to common shares, to the Treasury Department as part of the loan package it received under the Troubled Asset Relief Program.

As part of the program, Morgan Stanley received US$10 billion in funding from the government to help bolster its balance sheet as credit markets essentially shut down. In exchange, the government received preferred shares in Morgan Stanley and the warrants to purchase common shares.

The government launched the program at the height of the credit crisis, shortly after Morgan Stanley's competitor Lehman Brothers Holdings Inc collapsed. Hundreds of banks participated in the US$700-billion program.


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