UPDATE 2-US Treasury to net $1.5 billion from BoFA warrants

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WASHINGTON, March 4 (Reuters) - The U.S. Treasury Department said on Thursday it priced two classes of Bank of America Corp (BAC.N) warrants in a deal that will bring record net proceeds of $1.5 billion.

The net proceeds from auction for Bank of America will surpass JPMorgan Chase & Co. (JPM.N) warrants totaling $936 million. That auction was held in December.

The record amount will allow for taxpayers to "get a return for their very risky investment that they made in Bank of America and many other banks," said Linus Wilson, associate professor of finance at University of Louisiana at Lafayette.

The Treasury auctioned one class of warrants at $8.35 per warrant and a second class at $2.55.

The 272.17 million warrants to purchase common stock in Bank of America were priced in a modified Dutch-style auction, the department said.

The sale marks the disposal of the government's remaining investment in the banking giant, the department said. The Treasury received the warrants last year in exchange for $45 billion in bailout money.

The closing of the sale is expected to occur on or about March 9, the department said.

Deutsche Bank Securities was sole underwriter, with Blaylock Robert Van LLC, CastleOak Securities LP, Guzman & Co, Loop Capital Markets LLC, M.R. Beal & Co and Toussaint Capital Partners LLC as co-managers.

"The money that is raised from these warrant auctions will help offset losses from other investments that will not turn out so well," Wilson said.

One such investment, CIT Group Inc. (CIT.N), the large U.S. commercial lender that filed for bankruptcy in November and emerged the following month, said this week it lost about $900 million in the fourth quarter and $4 billion in all of 2009.

Warrants are a right to buy stock at a certain price on a fixed date. Each Bank of America warrant will give a holder the right to buy one share of Bank of America.

The exercise price for one class of 121.8 million warrants is set at $30.79 and expires October 2018. The exercise price for the second class of 150.4 million warrants is set at $13.30 and expires January 2019.

The sale is the latest in a series of Treasury auctions of warrants received from banks that accessed the $700 billion Troubled Asset Relief program.

The Treasury has received about $4.03 billion from the sale of stock warrants. Other major warrant sales that could bring big returns to taxpayers include those for Citigroup Inc (C.N), Wells Fargo & Co (WFC.N) and PNC Financial Services Inc (PNC.N).

Treasury had injected $45 billion into Citigroup, while Wells Fargo received $25 billion.

The Treasury Department has repeatedly said it expects to make money on its investments in banks, but expects to lose money on investments tied to insurer AIG, U.S. automakers and housing.

TARP was approved by Congress in 2008 as a financial rescue program to buy toxic or impaired assets from banks but was converted into a fund for Treasury to make capital injections into ailing banks. (Reporting by Nancy Waitz; Editing by Neil Stempleman)