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| US govt to inject $3.39 bn into Amex in lieu of shares: CEO |
| Press Trust of India / New York Dec 26, 2008, 20:04 IST |
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Credit card firm American Express, a bank holding company, will receive $3.39 billion from the US government's bailout package for the financial sector, company CEO Ken Chenault informed the staff.
American Express which has been hit by the financial turmoil, sought to change itself into a bank holding company to increase its access to capital.
Further, with the government buying stakes, the company would pay a five per cent dividend annually for the first five years and then nine per cent annually thereafter.
"The Treasury department is making an equity investment in American Express similar to the ones it has been making in some of the largest and best-capitalised US banks.
The Treasury will purchase $3.39 billion in newly issued American Express preferred shares. The proceeds from the sale will further strengthen our capital position," Chenault said in an internal memo.
According to the company chief executive, in return for the stakes, the firm would pay an annual dividend of five per cent for the first five years and subsequently nine per cent annually thereafter.
Going by the purchase agreement, American Express can repay the Treasury its original principal amount and retire the shares after three years.
"The amount of the Treasury departments investment in American Express was determined by a formula based on the asset size of companies participating in the program," Chenault noted.
The Federal government had come up with the $700-billion bailout plan, known as Troubled Asset Relief Program (TARP) in October this year to boost the nation's battered financial sector.
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