Summary
Bank of America Corporation (BAC) filed an 8-K on May 29, 2013, reporting the issuance of 40,000 shares of its new Series U Preferred Stock. This new preferred stock has specific dividend and redemption terms that will impact the company's ability to pay dividends or repurchase its common stock and other parity or junior preferred stock if it fails to meet its obligations on the Series U Preferred Stock. This filing is significant for investors as it introduces a new class of preferred equity with restrictive covenants tied to common and other preferred stock actions.
Key Highlights
- 1Bank of America issued 40,000 shares of Series U Preferred Stock on May 29, 2013.
- 2The Series U Preferred Stock has a liquidation preference of $25,000 per share.
- 3Failure to pay full dividends on Series U Preferred Stock imposes restrictions on dividends, repurchases, and redemptions of common stock and parity/junior preferred stock.
- 4The company filed a Certificate of Designations to establish the rights and preferences of the Series U Preferred Stock.
- 5Bank of America also closed the sale of 1,000,000 Depositary Shares, each representing a 1/25th interest in a share of Series U Preferred Stock.
- 6The issuance and sale were made pursuant to a prospectus supplement dated May 21, 2013.
Frequently Asked Questions
The Series U Preferred Stock is a new class of preferred stock issued by Bank of America. While the filing doesn't explicitly state the reason for issuance, preferred stock is often issued to raise capital. The specific terms, including dividend rights and liquidation preference, are detailed in the Certificate of Designations.
The key implication is that if Bank of America fails to pay the full dividends on the Series U Preferred Stock, it will be restricted from paying dividends or repurchasing its common stock or any preferred stock that ranks equally with or junior to the Series U Preferred Stock. This prioritizes payments to Series U Preferred stockholders over common stockholders and other junior preferred stock.
The Series U Preferred Stock represents the actual shares of preferred stock. The Depositary Shares are fractional interests (1/25th) in a share of Series U Preferred Stock, which are sold to investors. Each Depositary Share represents a smaller unit of ownership in the underlying preferred stock, making it more accessible to a wider range of investors.
The Series U Preferred Stock has a liquidation preference of $25,000 per share. This means that in the event of liquidation, holders of this preferred stock are entitled to receive $25,000 per share before any distribution is made to common stockholders.