US regional bank National City, which earlier this month approved a $7 billion (€4.8 billion) capital infusion involving private equity firm Corsair Capital and the Ontario Teachers’ Pension Plan, saw its stock slip 63 percent today after a financial bailout packaged collapsed in Congress.
Cleveland-based National City finished trading at $1.36 per share, down from an open of $2.80. The bank’s shares are down 73 percent from the $5 per share Corsair agreed to pay for 20,000 shares as part of a private consortium's $985 million investment in National City last April.
In that agreement, Corsair also received a warrant to purchase 39,250,000 shares of the Company’s common stock at a strike price of $7.10, according to Securities and Exchange Commission filings.
Corsair and National City declined comment on the current value of Corsair’s stake in the bank.
The New York-based private equity firm’s investment in National City has often been compared to TPG’s $2 billion investment in now defunct Seattle-based savings and loan Washington Mutual. TPG effectively lost its remaining $1.3 billion stake in WaMu yesterday when the bank was seized by federal regulators and then sold it deposits and loan portfolio assets to JPMorgan.
Much like the WaMu deal, Corsair’s investment in National City involved a so-called reset clause, whereby Corsair would be compensated for its investment if the bank sold more than $300 million in equity at a price of less than $5 per share.
Earlier this month, TPG waived its reset clause to grant WaMu greater flexibility in seeking a potential acquirer.
A spokeswoman for National City reiterated that the bank maintains one of the highest regulatory capital ratios among large banks and that it had less exposure to the US housing market than WaMu.
National City was not the only private equity-backed public company to watch its share price drop after news that the $700 billion bailout stalled. Warburg Pincus-backed bond guarantor MBIA closed at $10.85, down 21 percent for the day.