GM to buy stake from US Treasury

Updated 19 December 2012
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GM to buy stake from US Treasury

NEW YORK: General Motors Co. said it will buy back 200 million of its shares from the US Treasury and the government plans to sell its remaining stake within 15 months, all but assuring a multibillion dollar loss.
GM Chief Financial Officer Dan Ammann said the automaker will pay $ 5.5 billion, or $ 27.50 a share, for the Treasury-held shares in a deal expected to close by year-end. That represents a 7.9 percent premium on Tuesday’s closing price. GM shares rose 8.2 percent to $ 27.58.
Treasury said it will sell its remaining stake of about 300.1 million shares “through various means in an orderly fashion,” and could begin the process as soon as January.
The auto giant, dubbed “Government Motors,” received about $ 50 billion from the Treasury as part of its bankruptcy restructuring in 2009 under the Troubled Asset Relief Program (TARP).
The stock sale is part of a broader push to wind down the controversial financial bailout, created by US President Barack Obama’s predecessor, George W. Bush, to prevent the collapse of the US banking industry during the 2007-2009 financial crisis.
On Tuesday, Treasury said it would largely sell its remaining shares in bailed-out banks over the coming 12 months to 15 months. Last week it sold the last of its common stock in American International Group Inc. at a profit.
Obama heavily promoted his decision to use public funds to rescue the auto industry and save jobs as he campaigned for re-election in swing states like Michigan and Ohio. Voters in both states backed him again in the Nov. 6 election, providing critical support in his victory.

The GM sale will raise the proceeds that Treasury has recovered to $ 28.6 billion. With $ 20.9 billion left from the original bailout, the government would have to sell its remaining shares at an average price of $ 69.72 to break even.
If Treasury sold its remaining stock at the price GM is paying now, it would come up short by more than $ 12 billion.
TARP was approved by Congress as a $ 700 billion program, though Treasury eventually disbursed $418 billion. It said yesterday it had recovered $ 381 billion to date, or about 90 percent.
“TARP was always meant to be a temporary, emergency program. The government should not be in the business of owning stakes in private companies for an indefinite period of time,” Treasury Assistant Secretary Timothy Massad said in a statement.
“Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests.”
After the buyback, Treasury will still own a stake of about 19 percent, down from about 26 percent currently. Ammann said GM will not buy more shares directly from Treasury after this buyback is completed.
Ammann said the move and resulting Treasury plans will remove an “overhang” on the stock that has hurt sales and bring an “element of closure” to the bailout.
GM will end the year with estimated liquidity of about $ 38 billion, even after the deal, he said. That will add to earnings per share by reducing the number of outstanding shares by about 11 percent.
GM will take a charge of about $ 400 million in the fourth quarter tied to the buyback.
In addition, Treasury has agreed to relinquish certain governance rights, including required levels of US manufacturing and barring the purchase of corporate jets, Ammann said. Senior executive payment caps under TARP remain in place.


Barclays chief Staley survives whistleblowing inquiry with fines

Updated 24 min 50 sec ago
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Barclays chief Staley survives whistleblowing inquiry with fines

  • Case marks first test of Britain's "senior managers regime"
  • Decision not to dismiss Staley comes as relief for shareholders

Barclays said Jes Staley will be fined by British regulators for attempting to unmask a whistleblower, but will be able to keep his job as the bank’s chief executive.
The country’s banking watchdogs concluded Staley’s attempt to find out who wrote a letter raising “concerns of a personal nature” about an unnamed senior employee represented a breach of individual conduct, Barclays said on Friday.
Staley’s case is the first big test of Britain’s “senior managers regime” (SMR), aimed at making top banking officials personally accountable for their actions after few were punished for their roles in bank collapses during the financial crisis.
If Staley accepts the findings of the regulators, it would be the first time that a sitting chief executive of a major bank in Britain has been fined by its regulators. A bank spokesman said the size of the fine had yet to be determined.
Barclays said the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) were “not alleging that he (Staley) acted with a lack of integrity or that he lacks fitness and propriety to continue to perform his role as Group Chief Executive Officer.”
News of the FCA and PRA fines follows a more than year-long probe in Britain that had led to speculation among some investors and bank insiders that Staley could have been forced to step down if deemed unfit to continue by those authorities.
Barclays also said that the FCA and PRA will not take enforcement action against the bank, while authorities in the United States are still investigating the case.
“Staley will live on to fight another day – which we welcome as a positive development for the bank and a relief for shareholders,” John Cronin at Irish broker Goodbody said.
“He’s been delivering on the strategy far more effectively than his predecessor had and therefore absent any sort of genuine malpractice we’re pretty keen for him to crack on,” one of the bank’s top 40 investors said.
The British bank, which in April last year said it had reprimanded Staley and would cut his bonus for his attempts to identify the whistleblower, will be required to report to the FCA and PRA on aspects of their whistleblowing programs.
The watchdogs could have banned Staley and opting for a fine could dent the fledgling SMR’s credibility.
“The magnitude of banning the sitting CEO of such a systemically important institution made outcomes other than a fine unlikely, but the case does set an interesting precedent,” said Nicholas Queree, an associate at law firm Peters & Peters.
Staley received the draft warning notice last week and was given 28 days to accept the findings or appeal. If he agrees to pay the two fines he would get a 30 percent discount.
The fines have been set according to a formula that considers the type of offense, the offender’s position in the company, any financial hardship, any previous cases, and whether there was any monetary benefit from the offense.
“We ... will announce the outcome once this issue has reached a conclusion,” the FCA and PRA said in a statement.
Legal experts question whether a light sanction for Staley could send a signal to other potential bank whistleblowers that they risk unmasking if they speak out.
Barclays said it will recommend Staley’s re-election as a director at its board meeting on May 1. At the last annual meeting he faced resignation calls, but was given a public endorsement from Chairman John McFarlane.
Staley’s pay package was £3.88 million ($5.45 million) in 2017, 8.5 percent less than the previous year.