The Treasury Department released guidelines Tuesday for mutual thrifts without a holding company to apply for government capital.

Though the Treasury had issued term sheets last week for mutuals with holding companies, giving them until May 14 to apply for Troubled Asset Relief Program funds, it had left the terms unclear for institutions without a holding company. How to give capital to mutuals has been a hurdle, since some do not issue stock.

On Tuesday the Treasury said mutuals without a holding company would issue subordinated debt equal to 1% to 3% of their risk-weighted assets in the form of Tier 2 capital for government aid.

Mutuals must pay a 7.7% interest rate on the debt each year after the fifth year of issuance, and they will be subject to dividend restrictions. They also must issue warrants, which the Treasury plans to exercise immediately, equal to 5% of the amount of debt issued.

At least 38 mutual thrifts have applied for Troubled Asset Relief Program funds. The Treasury said institutions that have already applied need not apply again.

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