A Warburg Pincus deal to invest $115 million in Webster Financial on Monday left at least some folks scratching their heads.
The private equity firm agreed to start with an initial investment acquiring 5.9 percent of Webster’s common stock, to be raised to 15.2 percent after getting regulatory and other approvals.
On the face of it, the 5.9 percent figure was unusual because the stake threshold for private investors in banks is 9.9 percent — beyond which they need to get the Fed to sign off on the deal.
So, why 5.9 percent and not 9.9 percent (or even nothing) before all approvals?
As it turns out, the 5.9 percent is actually like 9.9 percent – when you include the warrants that Warburg is getting as part of the deal, according to a source familiar with the matter.
When the Fed works out the 9.9 percent number, it takes into account the warrants — even if they have not or will not execute them, the source said.
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