8-KShareholder MattersCorporate ChangesOther Events+1

BANK OF AMERICA CORP /DE/ 8-K Report, Rights Modification (Feb 16, 2007)

Filed February 16, 2007For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

This 8-K filing by Bank of America Corporation (BAC) on February 16, 2007, primarily details significant financing activities and modifications to securityholder rights. The company issued new series of preferred stock (Series F and Series G) that impose restrictions on dividends or repurchases of common stock and other junior stock if preferred dividends are not met. Furthermore, BAC announced the completion of several substantial capital-raising transactions. These include the public offering of $2 billion in Floating Rate Callable Senior Notes due February 2010 and the successful closing of two separate issuances of Hybrid Income Term Securities (HITS) by newly formed trusts (Trust XIII and Trust XIV), totaling $700 million and $850 million, respectively. These HITS offerings involved the issuance of preferred stock and related debt instruments, secured by collateral agreements and guaranteed by Bank of America. The filing also outlines Replacement Capital Covenants, which place conditions on the redemption or repurchase of certain debt and preferred stock in relation to these new issuances.

Key Highlights

  • 1Bank of America established new Series F and Series G Preferred Stock, which place restrictions on common stock dividends if preferred dividends are not paid.
  • 2The company completed a $2 billion offering of Floating Rate Callable Senior Notes due February 2010.
  • 3BAC Capital Trust XIII closed a $700 million offering of Floating Rate Preferred Hybrid Income Term Securities (HITS).
  • 4BAC Capital Trust XIV closed an $850 million offering of 5.63% Fixed to Floating Rate Preferred Hybrid Income Term Securities (HITS).
  • 5These HITS offerings involved complex structures including trust declarations, supplemental indentures for junior subordinated notes, stock purchase contracts, and guarantee agreements.
  • 6Replacement Capital Covenants were entered into to restrict redemptions of HITS and preferred stock unless proceeds come from qualified securities, impacting existing debt holders.
  • 7The transactions were conducted on a delayed basis under a Registration Statement on Form S-3, utilizing Rule 415.

Frequently Asked Questions

The Series F and Series G Preferred Stock were established to introduce dividend payment priorities. If Bank of America fails to pay full dividends on these preferred stocks, it will face restrictions in declaring or paying dividends, or repurchasing its common stock and other 'Junior Stock'.

Bank of America issued $2 billion in Floating Rate Callable Senior Notes. It also facilitated the issuance of $700 million in Floating Rate HITS through BAC Capital Trust XIII and $850 million in Fixed to Floating Rate HITS through BAC Capital Trust XIV. These HITS offerings involved preferred stock, junior subordinated notes, and guarantees.

Replacement Capital Covenants are agreements that restrict Bank of America from redeeming or repurchasing certain HITS and preferred stock unless the repurchases are funded by specific qualified securities. This aims to protect existing debt holders by preventing the company from using operating cash flow for such repurchases when specific debt instruments remain outstanding.

The use of separate trusts is a common securitization structure. These trusts typically issue the hybrid securities (HITS) to investors, with the underlying assets or guarantees provided by the parent company (Bank of America). This structure can offer tax and accounting benefits and helps isolate the specific financial characteristics of the issued securities.