February 27, 2009
Authored by: Bryan Cave
The Treasury has provided a list of FAQs to address the changes to the Capital Purchase Program resulting from the American Recovery and Reinvestment Act of 2009 (the “Act”). These FAQs deal with how an institution that has received TARP Capital can redeem the investment and with how the redemption affects other aspects of the investment.
Importantly, the FAQs explicitly acknowledge that the participating institution may (1) redeem the investment under terms different from the terms contained in the original transaction documents, and (2) redeem less than the whole amount — 25% of the issue price is the minimum amount that can be redeemed.
According to the FAQs, an institution wishing to redeem should notify the Treasury and the institution’s primary regulator, who will then consult with the Treasury regarding the redemption. Detailed payment instructions will be given to the institution after the notification and consultation process.
The institution must pay any dividends, whether cumulative or non-cumulative, that are accrued and unpaid at the time of redemption, even if the institution did not or would not actually declare dividends for the period.
The Treasury has setup a new e-mail address to handle notifications of redemption: CPPRedemption@do.treas.gov.