8-KLeadership ChangesMaterial AgreementsSecurities & Listing+3

BANK OF AMERICA CORP /DE/ 8-K Report, Material Agreement (Jan 22, 2009)

Filed January 22, 2009For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

This 8-K filing details significant agreements between Bank of America Corporation (BAC) and the U.S. Department of the Treasury (Treasury) executed on January 15, 2009. The primary transaction involved the issuance of $20 billion in capital to the Treasury, comprised of $20 billion in Series R Preferred Stock and a warrant to purchase common stock. This infusion of capital was aimed at strengthening Bank of America's financial position amidst the ongoing financial crisis. Furthermore, the filing outlines a critical loss-sharing agreement with the U.S. Government (USG) covering approximately $118 billion in assets. Under this arrangement, the USG will bear 90% of eligible losses beyond the first $10 billion, significantly de-risking a substantial portion of Bank of America's asset portfolio. These actions, while providing substantial financial support, come with certain restrictions and obligations for Bank of America, including compensation limits for senior executives and limitations on dividend payments and stock repurchases.

Key Highlights

  • 1Bank of America issued $20 billion in Series R Preferred Stock and a warrant to purchase common stock to the U.S. Treasury.
  • 2The Series R Preferred Stock qualifies as Tier 1 capital and carries an 8% annual dividend rate.
  • 3The Treasury received a warrant to purchase 150,375,940 shares of common stock at an exercise price of $13.30 per share.
  • 4A significant loss-sharing agreement was established with the U.S. Government for approximately $118 billion in assets.
  • 5Under the loss-sharing agreement, the U.S. Government will cover 90% of eligible losses beyond the initial $10 billion borne by Bank of America.
  • 6The agreements include compensation limitations for Bank of America's senior executive officers.
  • 7Restrictions are imposed on Bank of America's ability to pay dividends on common stock and redeem other classes of stock without Treasury approval.

Frequently Asked Questions

The primary purpose was to strengthen Bank of America's capital base and financial stability by injecting $20 billion in capital from the U.S. Treasury, crucial during the financial crisis of 2008-2009.

The U.S. Government agreed to share losses on approximately $118 billion of Bank of America's assets. Bank of America will cover the first $10 billion in eligible losses, and the U.S. Government will cover 90% of any additional eligible losses.

Bank of America agreed to compensation limitations for senior executives and certain other senior managers. Additionally, the company's ability to declare dividends on common stock and repurchase or redeem other stock is restricted and requires the prior approval of the Treasury.

Bank of America issued $20 billion of Fixed Rate Cumulative Perpetual Preferred Stock, Series R, which qualifies as Tier 1 capital and pays an 8% annual dividend. They also issued a warrant to the Treasury allowing the purchase of 150,375,940 shares of common stock at $13.30 per share.