On October 28, representatives of the American Bankers Association (the "ABA") met with senior U.S. Treasury Department ("Treasury") officials to discuss Treasury's voluntary Capital Purchase Program ("CPP"). The meeting focused on the program's requirements for participation by non-exchange traded reporting corporations, private corporations, subchapter S corporations and mutual institutions and the expected specific guidance to be given by Treasury regarding these entities.
Based on the meeting, the ABA understands that additional guidance for private companies, mutual institutions and subchapter S corporations may take Treasury additional time to release and that Treasury intends to extend the time period in which these institutions may submit applications to participate in the CPP.
According to the ABA, the following significant points were raised during the meeting:
- Treasury officials indicated that the November 14, 2008
application deadline and the existing public term sheet for the CPP
applies solely to publicly traded entities.
- Treasury officials indicated that non-public institutions will
receive their own term sheets and separate application deadlines in
stages.
- Treasury officials added that while publicly traded banks and
bank holding companies should apply for the program by November 14,
2008 there is no need for these institutions to decide whether to
comply with all program requirements or to accept any capital
awarded under the program until some later date.
- Sometime today Treasury expects to address the problem posed by
the federal securities laws that prevents publicly traded banks and
bank holding companies that are not exchange-traded from filing
shelf registrations for both the senior preferred stock and
warrants to be sold under the terms of the CPP.
- Publicly traded banks and bank holding companies that are not
authorized to issue preferred stock but still want to apply for the
program should do so by November 14, 2008. Subsequent to that date,
they should quickly obtain the required shareholder approval to
issue preferred shares. Treasury anticipates that all required
documentation will be submitted 30 days after the institution has
received preliminary acceptance into the CPP.
- The Securities and Exchange Commission ("SEC") will
consider the warrants issued under the CPP as permanent equity and
an SEC letter confirming that fact soon will be made public.
- Treasury does not intend to alter a privately held
corporations' status under the federal securities laws, and
Treasury pledged to resolve the concerns about the transferability
of warrants. Specifically, Treasury is expected to address the
potential that the exercise of warrants and the sale of underlying
stock may cause privately held institutions to become publicly
traded because they would have more than 500 shareholders of
record.
Specific additional formal guidance regarding the CPP is expected to be released by Treasury and the SEC in the coming days. We will continue to monitor additional information regarding the CPP and the further developments affecting the financial industry.
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