Summary
Bank of America Corporation (BAC) filed an 8-K on August 25, 2011, detailing a significant capital infusion from Berkshire Hathaway Inc. The company announced a Securities Purchase Agreement under which Berkshire Hathaway agreed to purchase $5 billion worth of BAC's securities. This transaction included 50,000 shares of a new 6% Cumulative Perpetual Preferred Stock, Series T, with a liquidation value of $100,000 per share, and a warrant to purchase 700,000,000 shares of BAC's common stock. This strategic move aimed to bolster Bank of America's capital base during a challenging financial period. The preferred stock carries specific dividend terms, including a potential increase to 8% if dividends are not paid in full, and restrictions on common stock dividends or repurchases if preferred dividends are in arrears. The warrant provides Berkshire Hathaway with a substantial equity stake potential in BAC's common stock, subject to anti-dilution provisions and ownership limitations.
Key Highlights
- 1Bank of America secured $5 billion in capital from Berkshire Hathaway Inc. through a Securities Purchase Agreement.
- 2The investment comprises $5 billion in newly issued 6% Cumulative Perpetual Preferred Stock, Series T.
- 3A warrant was issued to Berkshire Hathaway to purchase 700,000,000 shares of Bank of America common stock.
- 4The preferred stock has a 6% dividend rate, which can escalate to 8% if dividends are not declared and paid.
- 5Restrictions are placed on BAC's ability to pay common stock dividends or repurchase shares if preferred dividends are in arrears.
- 6The warrant is exercisable for ten years at an exercise price of $7.142857 per share, with anti-dilution protections.
- 7Berkshire Hathaway agreed not to increase its beneficial ownership of BAC common stock above 14.9%.