This presentation provides an overview of the valuation (fair market value) of the warrants issued to the Treasury by banks participating in the "TARP" Capital Adequacy Program.

2. – About Us –
Pluris Valuation Advisors LLC
is a valuation firm headquartered in New York.
We believe Pluris values more warrant
positions than any other valuation firm in the
United States.
Pluris combines valuation and
technical accounting expertise in its
development and application of valuation
methodology in compliance with tax valuation
LEADING standards, as well as U.S. GAAP and IFRS.
WARRANT Specific assets valued include
warrants and other restricted securities of
VALUATION FIRM IN THE public companies, auction rate
securities, collateralized debt obligations, asset
backed securities, distressed debt, bankruptcy
UNITED STATES claims, limited partnerships, and other assets
that lack liquidity. Pluris’ valuations are also
used for tax purposes and litigation support.
Our proprietary LiquiStat™
database enables Pluris to value even the
most illiquid securities based on market data
from the secondary market. Pluris’ access to
professionals operating the largest secondary
marketplace for illiquid warrants provides us
with market “color” that cannot be captured in
academic research or databases.
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3. – Our Clients Include –
Global Financial
Institutions that require Public companies that need
valuations of hard-to-value illiquid or illiquid securities valued in order to
distressed securities comply with the fair value rules of
U.S. GAAP or IFRS
Hedge Funds and other
investment advisors that need their Large estates and high net worth
portfolios valued for their monthly families who need assets valued for
and quarterly investor statements estate-planning purposes
Litigants who need expert
testimony for lawsuits involving
securities and enterprise values.
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4. – The Pluris Advantage –
• Rules of thumb, or theory alone, are not
appropriate for valuations of illiquid warrants.
Individual discount determinations are
needed. This requires market data. LiquiStat
contains more data on trades in illiquid
warrants than any other study.
• Very little empirical transaction data exists on
LiquiStat the market for illiquid securities. Pluris’
exclusive access to the LiquiStat database
of restricted securities transactions on
SecondMarket is unique.
database
™
• Our proprietary LiquiStat database provides
the comprehensive data from real-world
transactions that is needed to
generate, document and support valuations
of illiquid assets.
• Unlike data on private placements by the
issuer, where discounts may result from
many factors, LiquiStat data comes from
arm’s-length investor trades in restricted
securities, that are a pure reflection of fair
value.
• LiquiStat, along with our capital markets
expertise and in-depth knowledge of the legal
and regulatory environment for restricted
securities, ensures our clients get the most
accurate valuations possible.
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5. – Repurchase Procedure –
After the full redemption of preferred shares, each Bank may
repurchase warrants using these procedures:
• Bank provides the Treasury with its own determination of the Fair Market
Value, relying on the opinion of an appraiser
• If the Treasury objects, the Bank and Treasury meet to resolve differences
• If differences are not resolved, the Appraisal Procedure is invoked, as
follows:
• Both Treasury and Bank each select an appraiser, each of whom do their
own valuation of the Warrants and attempt to agree
• If the two appraisers do not agree on the value, the two appraisers agree on
a third appraiser
• The three valuations are averaged, rejecting wide outliers, and this average is
binding on both parties
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6. – How to Get There –
It is critical that each valuation for this purpose is backed by
research that:
• Is based on arm’s-length transactions in illiquid warrants, as empirical data
has great potential for resolving conflicts, while theoretical model
prices are more likely to prolong disagreements (in a world of “made-to-order”
opinions)
• Is specifically tailored to provide valuation discounts suitable for this purpose
(valuation discounts for entities with similar financial characteristics)
• Provides ranges and tolerances around central estimates, to further enhance
decision making during the negotiation process
• Is based on well-recognized models and statistical methods
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7. – Warrant Basics –
Warrants are long-term call options on the issuer’s own stock. The
valuation of a warrant is impacted by:
• The terms of the warrants (exercise • Trading characteristics of the underlying
price, expiration date, anti-dilution security
protection, transferability, etc) (exchange, volume, price, volatility, etc.)
• Other rights, preferences, privileges, and • Ability to borrow the shares for purposes
restrictions of the underlying security of shorting/hedging
(registration rights, registration
• Precedent sale transactions completed in
status, etc.)
the secondary market.
• Time until the restriction(s) are released
• Fundamental financial and other
characteristics of the company
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8. – TARP Warrants –
Approximately 579 banks received TARP money. This includes 290
publicly traded banks with still-outstanding warrants. Typical terms
include:
• Ten years to expiration • Warrants for 15% of preferred shares
• Exercise prices based on the 20-day • Customary anti-dilution provisions
trailing average stock price before CPP
• No voting rights
application date
• Shelf registration and piggyback rights
• American options
Banks* Number of Warrants Aggregate Intrinsic Aggregate Market Cap
(millions) Value ($m) ($m)
All TARP Banks with
Warrants (290) 1,440 523 650,862
All With In-the-Money
Warrants (40) 206 523 131,475
All With Out-of-the-
Money Warrants (250) 1,235 NA 519,387
* All publicly traded CPP recipient banks with still-outstanding warrants. Data as of May 15, 2009.
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9. – Warrant Illiquidity Discounts –
• Illiquidity discounts apply to all restricted
and otherwise illiquid securities.
Discounts apply to theoretical “model”
prices. • Transaction data from private placement
studies supplement our research. Pluris
• Transaction data from arm’s-length
uses all industry-standard databases.
investor trades in restricted securities
from the LiquiStat database serve as the • An analysis of borrowing rates, if the
empirical foundation for determining the security is borrowable, or hedging
discount. costs, if it is hedgable, can provide
additional support.
• Academic research indicates options
without trading are worth significantly less • Other value indications can be
than options that are traded. This should determined based on theoretical
apply to illiquid warrants too. models, such as the Longstaff and
Finnerty models, for restricted stock.
The discount for lack of liquidity is based on a combination of
all relevant factors, methods, and empirical data; and appraiser
judgment.
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10. – Meet the Team –
Espen Robak, CFA, President Elpida Tzilianos, PhD, Senior Associate
President of Pluris Valuation Advisors LLC, is a nationally Head of New Product Development, also leads our illiquid
recognized expert on private warrants, illiquid debt instruments equities valuation practice while providing support for Pluris’
(including auction‐rate securities), FAS 157, valuations for bankruptcy practice. Ms. Tzilianos’ valuation experience
alternative investment managers, and discounts for lack of includes restricted stock, warrants, debentures (convertible and
liquidity; and a prolific author on valuation, accounting, and non-convertible) and other hard-to-value, illiquid and/or
taxation topics. Recent article topics include fair value of illiquid distressed securities. Prior to joining Pluris, Ms. Tzilianos was a
securities, auction‐rate securities valuation, PIPE (private Research Associate at Finnerty Economic Consulting LLC, a
investment in public equity) valuations, amendments to Rule litigation support, valuation, and financial consulting firm where
144, illiquidity discounts, valuation of stock options, M&A she conducted extensive private placement research and
arbitrage data, and restricted stock marketability discounts. Mr. complex modeling on restricted securities. Ms. Tzilianos also
Robak’s expert commentary has been featured in the Wall taught as an adjunct professor at both Manhattan College and
Street Journal, Financial Times, Forbes, CFO Fordham University’s Deming Scholars MBA Program. Ms.
Magazine, Bloomberg, Absolute Return, American Banker, The Tzilianos received her PhD in Economics from Fordham
Deal, Compliance Week, Inside Market University in 2006.
Data, Opalesque, Accredited Investor, and Hedge Fund
Manager Week. He is a columnist for Wealth Strategies Eric Liu, Head of Research
Journal.
Head of Research, is responsible for research on illiquid
Rick Martin, CPA, Vice President securities and for developing valuation models for illiquid equity
securities, auction-rate securities, limited partnership
Vice President of Technical Accounting, is in charge of interests, bankruptcy claims, and other illiquid assets. He is
resolution of technical accounting issues as they pertain to our primarily in charge of the maintenance and transactions analysis
valuation clients, and manages our relationships with audit required for the LiquiStat database. Furthermore, as a member
professionals. Mr. Martin’s valuation experience encompasses of the Product Development team, he assists in developing and
warrants, convertible preferred shares, and other restricted expanding the firm’s business lines. Prior to joining Pluris, Mr.
securities. Prior to joining Pluris, Mr. Martin served as Head of Liu worked for Merrill Lynch and Haver Analytics where he
Technical Accounting at Cowen and Company in New York gained asset management, and economic and financial research
and Senior Technical Accounting Advisor at Credit Suisse in experience. He also has four years of engineering and project
Zurich. Prior to Credit Suisse, Mr. Martin also held advisory management experience in the IT/Telecom industry in China.
roles in financial services at each of the Big Four accounting Mr. Liu earned his Master’s of Business Administration from
firms since 1997. Pace University and his Bachelor of Engineering degree from
Xidian University.
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11. – Contact Information –
26 Broadway, Suite 1202, New York, NY 10004
Tel: (212) 248-4500 | Fax: (212) 248-4599
www.PlurisValuation.com
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