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Published on 6/25/2009 in the Prospect News Investment Grade Daily.

Bank of America accepts $3.9 billion of preferreds in oversubscribed exchange offer

By Jennifer Chiou

New York, June 25 - Bank of America Corp. announced the results of its expired offer to exchange up to 200 million shares of common stock for depositary shares of some of its preferred stock.

The company said that it accepted about $3.9 billion of the $4.3 billion aggregate liquidation preference of depositary shares validly tendered.

The offer began May 28 and expired at midnight ET on June 24.

The preferreds eligible for exchange, the number of shares of common stock to be exchanged per depositary share, the dollar value of those shares and the acceptance priority levels of the preferreds are noted in the first table below.

The accepted notes are listed in the second table.

Bank of America also announced that it has entered into agreements with some holders of the perpetual preferred shares to exchange about $10.7 billion of their holdings into about 789 million shares of common stock. In total, the exchange offer and these privately negotiated exchanges cover the issue of about 989 million shares in exchange for $14.7 billion aggregate liquidation preference of preferred stock.

As already reported, the number of shares issuable for each exchanged depositary share is equal to the consideration amount divided by $12.7048, the average of the daily per-share volume-weighted average price of Bank of America common stock for the five consecutive trading days ended June 22.

One of the conditions of the exchange offer was that the common stock average price had to be $10.00 or greater.

Because the offer was oversubscribed, the acceptance of tendered depositary shares is based on their priority levels, and the depositary shares were subject to proration. A proration factor of 30% applies to the 8 priority level securities. No 9 priority level shares were accepted.

The offer was part of Bank of America's plan to exchange common stock for non-government perpetual preferreds in order to meet its $33.9 billion indicated Supervisory Capital Assessment Program buffer set by the Federal Reserve, which the company has now exceeded.

The company already said the exchange offer will increase its tier 1 common capital by an amount equal to the total liquidation preference of the depositary shares exchanged.

D.F. King & Co., Inc. (800 829-6551 or 212 269-5550) was the information agent.

Bank of America is a Charlotte, N.C.-based financial services company.

Bank of America exchange offer

Preferred stock seriesCommon sharesDollar amountPriority level
Floating-rate non-cumulative preferreds, series E1.2790$16.251
Floating-rate non-cumulative preferreds, series 51.2790$16.252
Floating-rate non-cumulative preferreds, series 11.1807$15.003
Floating-rate non-cumulative preferreds, series 21.1807$15.004
6.375% non-cumulative preferreds, series 31.3381$17.005
6.625% non-cumulative preferreds, series I1.3774$17.506
7.25% non-cumulative preferreds, series J1.4758$18.757
8.20% non-cumulative preferreds, series H1.6136$20.508
8.625% non-cumulative preferreds, series 81.6529$21.009
Preliminary results
Preferred stock seriesAmount tenderedAmount accepted
Floating-rate non-cumulative preferreds, series E$1,537,734,825$1,537,734,825
Floating-rate non-cumulative preferreds, series 5$894,323,000$894,323,000
Floating-rate non-cumulative preferreds, series 1$484,179,700$484,179,700
Floating-rate non-cumulative preferreds, series 2$583,616,850$583,616,850
6.375% non-cumulative preferreds, series 3$139,941,800$139,941,800
6.625% non-cumulative preferreds, series I$185,409,925$185,409,925
7.25% non-cumulative preferreds, series J$57,225,850$57,225,850
8.20% non-cumulative preferreds, series H$209,956,000$62,945,450
8.625% non-cumulative preferreds, series 8$200,971,075$0

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