8-KShareholder MattersCorporate ChangesOther Events+1

BANK OF AMERICA CORP /DE/ 8-K Report, Rights Modification (Dec 9, 2009)

Filed December 9, 2009For 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 December 9, 2009, primarily details significant corporate actions related to preferred stock and a large offering of "Common Equivalent Securities." The company issued Series S Preferred Stock, which carries specific restrictions on common stock dividends unless certain conditions are met, including stockholder approval of an amendment to increase authorized common shares. This issuance is tied to a substantial offering of approximately $19.29 billion in Common Equivalent Securities, which include Depositary Shares representing interests in the Series S Preferred Stock and Contingent Warrants for common stock. Furthermore, Bank of America announced the repurchase of all preferred stock previously issued to the U.S. Treasury under the Troubled Asset Relief Program (TARP). This action signals a move towards deleveraging and potentially strengthening the company's capital structure by exiting government-related financing arrangements, which is a key development for investors concerned with the company's financial health and independence.

Key Highlights

  • 1Bank of America issued approximately $19.29 billion of "Common Equivalent Securities" comprising Depositary Shares (linked to Series S Preferred Stock) and Contingent Warrants.
  • 2A new Series S Preferred Stock was issued with provisions that restrict common stock dividends if certain conditions, including stockholder approval for an increase in authorized common shares, are not met.
  • 3The company announced the repurchase of all preferred stock previously issued to the U.S. Treasury under the Troubled Asset Relief Program (TARP).
  • 4The Series S Preferred Stock has a liquidation preference and includes dividend provisions that can become non-cumulative and increase in rate if stockholder approval for common share increases is not obtained.
  • 5Holders of Series S Preferred Stock will vote on an as-converted basis with common stockholders on most matters, with additional voting rights in cases of dividend arrearages.
  • 6The issuance of Common Equivalent Securities was conducted through an underwriting agreement with various underwriters.

Frequently Asked Questions

The 'Common Equivalent Securities' are a complex financial instrument offered by Bank of America, valued at approximately $19.29 billion. They consist of Depositary Shares, which represent partial ownership in the newly issued Series S Preferred Stock, and Contingent Warrants that allow the purchase of common stock under certain conditions. These were likely issued as a way to raise capital and manage its capital structure during a challenging economic period, potentially offering a way to satisfy capital requirements or fund operations.

The repurchase of preferred stock issued to the U.S. Treasury under TARP is a significant step. It means Bank of America has fully repaid its financial obligations to the government related to that program. This action signifies a return to greater financial independence, reduces the influence of government-held stock, and can be viewed positively by investors as a sign of the company's improving financial strength and ability to operate without government financial backing.

The Series S Preferred Stock introduces restrictions on the payment of dividends on Bank of America's common stock. Specifically, the company's Board of Directors cannot declare or pay cash dividends on common stock unless they simultaneously declare and pay a dividend on the Series S Preferred Stock. Further restrictions apply if stockholders do not approve an amendment to increase the authorized number of common shares needed for conversion of the Series S Preferred Stock within a specified timeframe. In such cases, dividends on common stock could be further limited, and the Series S Preferred Stock could become entitled to Additional Dividends.

Holders of the Series S Preferred Stock generally have voting rights on an as-converted basis along with common stockholders on most matters. However, they do not vote on the specific amendment to increase the authorized common shares. Additionally, they possess certain enhanced voting rights if dividend payments on the Series S Preferred Stock fall into arrears.