Summary
Bank of America Corporation (BAC) announced on September 21, 2009, the termination of a material definitive agreement with the United States Department of the Treasury, the Federal Reserve Board, and the Federal Deposit Insurance Corporation (collectively, the "USG"). This agreement, initially a term sheet entered into on January 15, 2009, in conjunction with the acquisition of Merrill Lynch, provided protection against substantial losses on a pool of up to $118 billion in assets. The termination signifies Bank of America's decision to move forward without the government's asset protection. Under the terms of the termination agreement, Bank of America will pay a total of $425 million to the USG. This payment covers the USG's out-of-pocket expenses related to negotiating the term sheet and definitive documentation, as well as a pro-rated fee for the period the guarantee was being negotiated but not finalized, adjusted for certain asset pool exclusions.
Key Highlights
- 1Bank of America has terminated its asset protection agreement with the U.S. Government (Treasury, Federal Reserve, FDIC) that was in place since January 15, 2009.
- 2The agreement provided protection against potential losses on a pool of up to $118 billion in assets, stemming from the Merrill Lynch acquisition.
- 3Bank of America will pay $425 million to the USG for the termination of this agreement.
- 4The termination payment covers the government's negotiation expenses and a pro-rated fee for the period the guarantee was under discussion.
- 5This action indicates Bank of America's confidence in managing its asset risk without further government backing.
- 6The termination was agreed upon on September 21, 2009.