AmEx pays Treasury $340M to buy back stock warrants

NEW YORK -- American Express said Wednesday that it repurchased outstanding stock warrants issued to the government as part of the Troubled Asset Relief Program for $340 million.

American Express issued the warrants, which could have been converted to common stock, to the Treasury Department as part of the loan package it received last fall from the government.

American Express was one of hundreds of financial firms that received taxpayer loans as part of TARP's capital purchase program during the credit crisis that led to the collapse of investment bank Lehman Brothers Holdings and a bailout of insurer American International Group.

As part of that program, American Express received $3.39 billion from the government to help bolster its balance sheet as credit markets essentially shut down. In return, American Express issued the Treasury Department warrants to purchase common stock at a set price over the next 10 years and preferred shares that carried a 5% annual dividend rate.

In June, American Express repaid the $3.39 billion taxpayer loan, eliminating the outstanding preferred shares. Since being issued the loan package, American Express has paid $74.4 million in dividends to the government.

Between the dividend payment and repurchase of the warrants, the government earned an annualized 26% return on its investment.

The repurchase price for the warrants "reflects, in part, the appreciation of American Express' share price since the preferred shares were issued in January of this year," the company said Wednesday.

Other large financial firms that also repaid TARP funds last month have begun to repurchase warrants as well. Last week, Goldman Sachs Group, which received $10 billion in taxpayer money, bought back its outstanding warrants for $1.1 billion.