8-KMaterial AgreementsSecurities & ListingShareholder Matters+2

BANK OF AMERICA CORP /DE/ 8-K Report, Material Agreement (Aug 25, 2011)

Filed August 25, 2011For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

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%.

Frequently Asked Questions

This filing announces a material definitive agreement between Bank of America Corporation and Berkshire Hathaway Inc. for the purchase of $5 billion in preferred stock and a warrant to purchase common stock, intended to strengthen Bank of America's capital position.

Berkshire Hathaway purchased 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 Bank of America's common stock.

The preferred stock accrues a 6% annual dividend, payable only when declared by the board. If dividends are not paid in full, the rate increases to 8%, and BAC is restricted from paying common stock dividends or repurchasing shares. It can be redeemed by BAC under certain conditions, and it ranks senior to common stock in liquidation.

The warrant allows Berkshire Hathaway to purchase 700,000,000 shares of common stock at $7.142857 per share for ten years. It includes anti-dilution protections and a restriction for Berkshire Hathaway to not exceed 14.9% beneficial ownership of Bank of America's common stock.