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Northern Trust to get $1.5 billion from TARP

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By Barry B. Burr, Pensions & Investments

October 27, 2008 4:45 pm ET

Northern Trust will receive $1.5 billion in capital from the Treasury Department as part of its TARP captial purchase program to invest up to $250 billion in equity of financial companies to stabilize the industry, the company announced today.

The government will receive senior preferred stock and related warrants. The shares will be non-voting “other than class voting rights on matters that could adversely affect the shares,” the Northern Trust statement said.

Northern’s shareholder capital, all in common stock, totals $4.9 billion, spokesman John O’Connell said in response to questions.

The Treasury issue will be Northern’s only preferred stock, he added. The preferred stock will pay a 5% yeild. The deal is expected to close within 30 days.

“Obviously, it’s too soon to say specifically (what Northern will do with the new capital), but in general, we will do what we normally do: maintain a very strong capital relative to regulatory guidelines and the industry, and use our balance to support the business activities of our clients, Mr. O’Connell said. “We support the purpose of this program, which is to increase willingness of banks to make loans to get the economy moving.”

Frederick H. Waddell, president and CEO of Northern Trust, said in the statement: “Northern Trust fully supports the U.S. government’s efforts to strengthen our nation’s financial system. While our capital ratios exceed, by a considerable margin, those needed to earn the designation ‘well capitalized,’ the program will provide us with additional capital to maximize growth opportunities.”

Jennifer Zuccarelli, public affairs specialist at the Treasury Department, didn’t return calls for comment.

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