8-KOther EventsExhibits & Filings

BANK OF AMERICA CORP /DE/ 8-K Report, Corporate Update (Nov 5, 2012)

Filed November 5, 2012For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) announced on November 5, 2012, the completion of a significant debt restructuring event. The company redeemed $862.5 million in capital securities from BAC Capital Trust XII, which also involved the redemption and cancellation of the underlying 6⅞% Junior Subordinated Notes due 2055. This action has triggered a change in the specific debt instrument covered by a Replacement Capital Covenant. As a direct consequence of this redemption, the 6⅞% Junior Subordinated Notes no longer serve as the covered debt under the Replacement Capital Covenant entered into on February 16, 2007. In their place, Bank of America's 6.35% Subordinated InterNotes due December 2037 have been designated as the new covered debt, effective November 5, 2012. This move is important for investors as it alters the specific debt obligations that benefit from the terms of the Replacement Capital Covenant.

Key Highlights

  • 1Bank of America (BAC) redeemed $862.5 million in capital securities from BAC Capital Trust XII.
  • 2The redemption also involved the cancellation of underlying 6⅞% Junior Subordinated Notes due 2055.
  • 3This action triggered a change in the debt covered by a Replacement Capital Covenant.
  • 4The 6⅞% Junior Subordinated Notes are no longer the covered debt under the Replacement Capital Covenant.
  • 5The 6.35% Subordinated InterNotes due December 2037 are now the covered debt under the Replacement Capital Covenant.
  • 6The change in covered debt became effective on November 5, 2012.

Frequently Asked Questions

The main event is Bank of America's redemption of $862.5 million in capital securities from BAC Capital Trust XII and the associated cancellation of underlying debt, which resulted in a change to the debt instrument covered by a Replacement Capital Covenant.

A Replacement Capital Covenant is a contractual agreement that typically obligates the issuer to maintain certain levels of equity or junior debt, or to replace a certain amount of debt if it is redeemed. In this case, it specified which debt was covered and provided terms related to its replacement or maintenance.

This change signifies that the 6.35% Subordinated InterNotes due December 2037 have now taken the place of the 6⅞% Junior Subordinated Notes under the terms of the Replacement Capital Covenant. Investors should review the terms of the covenant to understand the implications of this shift in covered debt.

The filing does not explicitly state the reason for the redemption. However, such actions are often taken to reduce interest expenses, improve capital structure, or take advantage of favorable market conditions for refinancing debt.