Valuing TARP Preferred Stock

Posted: 10 Jul 2012 Last revised: 5 Dec 2012

See all articles by Linus Wilson

Linus Wilson

University of Louisiana at Lafayette - College of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: July 2, 2012

Abstract

This is the only paper to provide a valuation framework for untraded Troubled Asset Relief Program (TARP) preferred stock. Up to $8.1 billion of bailout preferred stock, which is currently paying dividends, could be auctioned to investors. The first auction was held in March 2012. This paper provides a framework to estimate future dividend skipping rates and the rating of unrated and untraded preferred stock issues. It provides a valuation model for non-distressed issues. The model in the paper accurately predicted that the auction of MainSource Financial Group (MSFG) would raise about $53 million.

Keywords: auctions, bailout, banks, Capital Purchase Program, dividends, hybrid securities, preferred stock, private placements, ratings, TARP, Troubled Asset Relief Program, valuation

JEL Classification: G01, G21, G28

Suggested Citation

Wilson, Linus, Valuing TARP Preferred Stock (July 2, 2012). Available at SSRN: https://ssrn.com/abstract=2103299 or http://dx.doi.org/10.2139/ssrn.2103299

Linus Wilson (Contact Author)

University of Louisiana at Lafayette - College of Business Administration ( email )

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