8-KShareholder MattersCorporate ChangesOther Events+1

BANK OF AMERICA CORP /DE/ 8-K Report, Rights Modification (Sep 9, 2014)

Filed September 9, 2014For 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 September 9, 2014, a significant development concerning its capital structure with the issuance of 40,000,000 Depositary Shares, each representing a 1/1,000th interest in a share of its new 6.625% Non-Cumulative Preferred Stock, Series W. This issuance involved the filing of a Certificate of Designations to establish the terms of the Series W Preferred Stock, which carries a liquidation preference of $25,000 per share. Key for investors is the introduction of restrictions on common stock and junior/parity preferred stock dividends and repurchases if full dividends on the Series W Preferred Stock are not paid. This structure is typical for preferred stock offerings designed to bolster regulatory capital while providing a fixed dividend to investors. The company also secured an over-allotment option for underwriters to purchase additional depositary shares, indicating strong investor demand expectations.

Key Highlights

  • 1Bank of America issued 40,000,000 Depositary Shares, each representing a 1/1,000th interest in a share of Series W Preferred Stock.
  • 2The new Series W Preferred Stock has a fixed dividend rate of 6.625% and is non-cumulative.
  • 3A key feature is the liquidation preference of $25,000 per share for the Series W Preferred Stock.
  • 4Restrictions are imposed on common stock and junior/parity preferred stock dividend payments and repurchases if the Series W Preferred dividends are not met.
  • 5The company granted underwriters an option to purchase up to an additional 6,000,000 Depositary Shares, suggesting strong market interest.
  • 6The filing includes a Certificate of Designations, Underwriting Agreement, and Deposit Agreement as supporting exhibits.

Frequently Asked Questions

The Series W Preferred Stock is a new class of preferred stock established by Bank of America to raise capital. It pays a fixed, non-cumulative dividend of 6.625% and has a liquidation preference of $25,000 per share. Such issuances are often part of a strategy to strengthen the company's capital base and meet regulatory requirements.

Non-cumulative means that if Bank of America fails to declare and pay the full dividend on the Series W Preferred Stock in any given period, that missed dividend is not owed to the shareholders in the future. The company is not obligated to make up for missed payments.

If Bank of America fails to declare and pay the full dividends on the Series W Preferred Stock, it will face restrictions. Specifically, it will be limited in its ability to declare or pay dividends on, or repurchase, its common stock or any preferred stock that ranks equally with or junior to the Series W Preferred Stock. This protects the preferred stockholders' dividend rights.

Instead of issuing the Preferred Stock directly, Bank of America is issuing Depositary Shares. Each Depositary Share represents a fraction (1/1,000th) of a share of the Series W Preferred Stock. This is a common practice that makes the preferred stock more accessible and tradable to a wider range of investors, often with a lower per-unit investment cost.