Despite the fact that no Subchapter S institution has yet received TARP Capital funds, and a term sheet for mutual organizations has not yet been announced, the Treasury has now provided documentation on how a TARP Capital recipient would redeem their investment, as permitted by the American Recovery and Reinvestment Act of 2009. On March 25, 2009, the Treasury published TARP Capital Purchase Program repurchase documents for public and private TARP Capital recipients.
Both the public and private documents contemplate the repurchase of all, or a portion of, the Company’s TARP Capital investment. Under the public company repurchase documents, if a Company repurchases 100% of the Treasury’s preferred stock, then the Company is also given 15 days to either repurchase the warrant for common stock at fair market value, or to issue a replacement warrant that does not contain the adjustment to reduce the number of shares covered by the warrant in the event of a qualified equity offering. Under the private company repurchase documents, once a Company repurchases 100% of the primary preferred shares (the ones initially paying 5%), it can also repurchase up to 100% of the warrant preferred shares (paying 9%).