TARP Money Goes to Ohio

In an 8-K filed on the 24th, PNC Finanical Services Corp. (PNC) announced that it would acquire National City Corp. (NCC). The money for the acquisition (dubbed a "take-under" because the price is below NCC's market cap) comes from the Treasury bailout fund. PNC will sell eight billion dollars in securities to Treasury. So, Treasury buys PNC and PNC uses the money to buy NCC. Apparently, NCC applied for TARP money and was turned down. As Business Law Prof observed someone in Treasury is reorganizing the Ohio banking industry.

So far the agreements aren't public, but Treasury has posted a term sheet on its website. Through TARP Treasury is buying preferred shares - they are senior to common and pay 5% return for 5 years and 9% thereafter. They also carry a veto on dividends.