8-KShareholder MattersCorporate ChangesOther Events+1

BANK OF AMERICA CORP /DE/ 8-K Report, Rights Modification (Jun 25, 2019)

Filed June 25, 2019For 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 June 25, 2019, to report material modifications to the rights of security holders and amendments to its articles of incorporation. The primary event detailed is the issuance and sale of 55,900,000 Depositary Shares, each representing a 1/1,000th interest in a share of newly designated 5.375% Non-Cumulative Preferred Stock, Series KK. This issuance was effectuated through a Certificate of Designations filed with Delaware, which outlines the preferences, limitations, and rights of this new preferred stock series. Investors should note the implications of this new preferred stock issuance. The Series KK Preferred Stock carries a liquidation preference of $25,000 per share. Crucially, the terms of this Series KK Preferred Stock impose restrictions on Bank of America's ability to declare or pay dividends on, or repurchase/redeem, its common stock or any parity junior preferred stock if full dividends on the Series KK Preferred Stock are not declared and paid. This filing provides details on the terms of the new preferred stock and the associated depositary shares, which were offered under a prospectus supplement dated June 18, 2019.

Key Highlights

  • 1Bank of America issued 55,900,000 Depositary Shares, each representing a 1/1,000th interest in a share of Series KK Preferred Stock.
  • 2The new preferred stock is designated as 5.375% Non-Cumulative Preferred Stock, Series KK, with a par value of $0.01 per share.
  • 3A Certificate of Designations was filed with Delaware to establish the terms, preferences, limitations, and relative rights of the Series KK Preferred Stock.
  • 4The Series KK Preferred Stock has a liquidation preference of $25,000 per share.
  • 5Failure to declare and pay full dividends on the Series KK Preferred Stock triggers restrictions on BAC's ability to pay dividends on or repurchase common stock and junior preferred stock.
  • 6The offering of Depositary Shares was made under a prospectus dated June 29, 2018, as supplemented by a prospectus supplement dated June 18, 2019.
  • 7The filing includes exhibits such as an Underwriting Agreement, the Certificate of Designations, and a Deposit Agreement.

Frequently Asked Questions

This 8-K filing primarily serves to announce the issuance of new preferred stock (Series KK) and associated depositary shares, and to report the formal designation and terms of this new preferred stock series through a Certificate of Designations filed with Delaware. It also details potential restrictions on common stock dividends if preferred stock dividends are missed.

The Series KK Preferred Stock is a 5.375% Non-Cumulative Preferred Stock with a liquidation preference of $25,000 per share. A significant feature is that failure to pay full dividends on this series will restrict the company's ability to pay dividends on or repurchase its common stock or any parity junior preferred stock.

The primary impact on common stockholders is indirect. If Bank of America fails to pay full dividends on the Series KK Preferred Stock, it is restricted from paying dividends on or repurchasing its common stock. This means common stockholders could see a delay or halt in dividend payments and buybacks under such circumstances.

Depositary Shares are instruments that represent a fractional interest in a share of preferred stock. In this case, each Depositary Share represents a 1/1,000th interest in one share of Series KK Preferred Stock. This structure is often used to make preferred stock more accessible to a broader range of investors.