Credit card firm American Express, a bank holding company, will receive $ 3.39 billion from the US government's bailout package for the financial sector, the company's chief executive officer Ken Chenault informed the staff at a recent meeting.
American Express which has been hit by the financial turmoil, sought to change itself into a bank holding company to increase its access to capital.
Further, with the government buying stakes, the company would pay a 5% dividend annually for the first five years and then 9% annually thereafter.
"The treasury department is making an equity investment in American Express similar to the ones it has been making in some of the largest and best-capitalised US banks."
"The treasury will purchase $ 3.39 billion in newly-issued American Express preferred shares. The proceeds from the sale will further strengthen our capital position," Chenault said in an internal memo.
According to the company chief executive, in return for the stakes, the firm would pay an annual dividend of 5% for the first five years and subsequently 9% annually thereafter.
Going by the purchase agreement, American Express can repay the treasury its original principal amount and retire the shares after three years.
"The amount of the treasury departments investment in American Express was determined by a formula based on the asset size of companies participating in the programme," Chenault noted.
The Federal government had come up with the $ 700-billion bailout plan, known as troubled asset relief program (TARP) in October this year to boost the battered financial sector in the United States.