When the Treasury announced the TARP Capital program on October 14, 2008, the program was available to those that “elect to participate before 5:00 pm (EDT) on November 14, 2008.”
On October 31, 2008, Treasury announced that the deadline was only for “publicly traded eligible institutions” and that Treasury would establish “a reasonable deadline for private institutions to apply.”
On November 10, 2008, Interim Assistant Secretary Neel Kashkari stated “The November 14 deadline will be extended for private banks so they have time to apply.”
So to whom does the deadline apply, and what does it mean?
Types of Companies
Exchange-Listed Public Companies
For companies listed on the New York Stock Exchange, the American Stock Exchange, and/or one of the NASDAQ exchanges (Global Select, Global or National), the deadline for applications is November 14, 2008. (In securities law vernacular, these are companies with a class of securities registered under Section 12(b) of the Securities Exchange Act of 1934.) While the Treasury may ultimately accept applications from such institutions after that date, these institutions should file by Friday, November 14, 2008.
Non-Exchange-Listed Public Companies
For companies that are “public” in that they file Form 10-K’s and Form 10-Q’s, but are not listed on an exchange, the deadline for applications may be November 14, 2008, but it may also be a later date. (In securities law vernacular, these are companies with a class of securities registered under Section 12(g) or that have an obligation to file reports under Section 15(d) of the Exchange Act. Please note as well that the NASDAQ Over-the-Counter Market and Pinksheets.com should not be considered exchanges.)
We have emailed representatives of the Treasury, the Federal Reserve, the OCC, the FDIC, and the OTS to determine whether the November 14th deadline applies to non-exchange-listed public companies. The Federal Reserve representative told us that the Board of Governors has determined that non-exchange-listed public companies will be treated as private companies, and the November 14th deadline DOES NOT apply. The OTS representative told us that the “OTS lawyers in DC” say that anyone that files a 10-K is considered to be a public company, and the November 14th deadline DOES apply. The OCC representative noted that he does not have a full answer, and that is is up to each institution to decide how it wishes to proceed: (a) under the terms of the announced term sheet as a publicly traded company; or (b) under the terms of the yet-to-be announced term sheet for private companies. (Neither the FDIC nor Treasury has provided a response yet, but today is a federal holiday.)
Private Companies (including Sub S)
For companies that do not file Form 10-K’s and Form 10-Q’s, then the November 14th deadline clearly does not apply. While no new deadline has been set, the Treasury has provided that the deadline will be “reasonable.”
Mutual Holding Companies
Because we do not currently represent any mutual holding companies, we have not been closely following TARP Capital from the perspective of mutual holding companies. However, exchange-listed mutual holding companies may need to apply by November 14th despite the fact that Treasury needs to provide further clarification to permit mutual holding companies to participate generally.
Actions to Take
For exchange-listed public companies, file by November 14th.
For non-exchange-listed public companies, until further definitive guidance is available, file by November 14th. Both the Federal Reserve and the OCC emphasized that to be conservative, non-exchange-listed public companies should file by November 14th.
For private companies, file by November 14th if you’re ready, but don’t worry should you want to take more time to review the proposals for private companies. We have heard conflicting advice from the federal banking regulators as to how much work they will do on applications for private companies right now, but all are in agreement that private companies can apply to their federal banking regulator now. There is no penalty for applying early and applications can always be amended.
When the Treasury announces a new term sheet for private companies, it may require that companies that have already submitted an application under the public term sheet need to withdraw that application and file a “new” application. However, given the streamlined nature of the application, it seems equally likely that simply telling the regulator which term sheet an institution is applying for will be sufficient.
It is also important to keep in mind that submitting an application does not create a binding obligation on the institution to accept TARP Capital if the institution is granted approval. Until the institution actually signs a binding agreement with the Treasury, there is no obligation on the institution to sell any security to the Treasury.