Treasury is about to cash in on one of its best-performing bailouts.
The government said Wednesday it will sell its 13 million warrants to buy shares in insurer Lincoln National in an auction to be conducted Thursday. Lincoln National, a life insurer based in Radnor, Pa., got $950 million last July and repaid the loan less than a year later.
The sale of the warrants, which give the holder the right but not the obligation to buy Lincoln shares for $10.92 apiece by July 2019, could raise as much as $273 million for the government, estimates Linus Wilson, who teaches finance at the University of Louisiana Lafayette and tracks the finances of the Troubled Asset Relief Program.
The warrants are likely to fetch a good price, he said, because they are solidly in the money – that is, they will give the buyer the right to buy the stock at a price well below the stock’s recent trading price. Lincoln National shares have risen 67% since the government extended the TARP loan to the company, and the company has paid an additional $46 million in dividends.
“The Lincoln National investment is likely to turn out to be one of the best investments the U.S. Treasury has made in the TARP program,” Wilson said.