8-KShareholder MattersCorporate ChangesOther Events+1

BANK OF AMERICA CORP /DE/ 8-K Report, Rights Modification (Sep 17, 2019)

Filed September 17, 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 September 17, 2019, to report the issuance of 52,400,000 Depositary Shares, each representing a 1/1,000th interest in a share of its 5.000% Non-Cumulative Preferred Stock, Series LL. This issuance involved a new series of preferred stock with a liquidation preference of $25,000 per share, totaling a significant capital raise. The filing details the Certificate of Designations that governs the rights and preferences of this Series LL Preferred Stock. Crucially, the terms of this Series LL Preferred Stock introduce restrictions on the company's ability to pay dividends or repurchase common or other parity/junior preferred stock if it fails to declare and pay full dividends on the Series LL Preferred Stock. This highlights a priority for dividend payments on this new preferred stock, impacting flexibility for common shareholders and other junior securities in certain scenarios.

Key Highlights

  • 1Bank of America issued 52,400,000 Depositary Shares representing a new series of preferred stock (Series LL).
  • 2The Series LL Preferred Stock has a fixed dividend rate of 5.000% and is non-cumulative.
  • 3Each share of Series LL Preferred Stock has a substantial liquidation preference of $25,000.
  • 4The issuance is structured as Depositary Shares, where each share of preferred stock is divided into 1,000 depositary shares.
  • 5A new Certificate of Designations was filed, outlining the terms and rights of the Series LL Preferred Stock.
  • 6Failure to pay full dividends on Series LL Preferred Stock triggers restrictions on dividend payments and repurchases of common stock and junior/parity preferred stock.

Frequently Asked Questions

This 8-K filing serves to report the issuance of a new series of preferred stock, specifically the 5.000% Non-Cumulative Preferred Stock, Series LL, and its related Depositary Shares, along with the associated legal documentation.

The issuance represents a significant capital raise for Bank of America. The 5.000% dividend rate is a fixed cost, and the non-cumulative nature means missed dividends do not accrue. Importantly, the terms place the Series LL Preferred Stock dividend payments as a priority, potentially restricting future distributions to common shareholders or other junior securities if dividends on Series LL are not met.

The primary impact on common shareholders is the introduction of a senior claim on the company's earnings and assets, relative to common stock. Specifically, if Bank of America fails to pay the required dividends on the Series LL Preferred Stock, it will be restricted from paying dividends on or repurchasing its common stock. This prioritizes the preferred shareholders' income stream.

While the 8-K reports the issuance of 52,400,000 Depositary Shares, it does not explicitly state the total capital raised. However, with a liquidation preference of $25,000 per share of Series LL Preferred Stock (which is comprised of 1,000 depositary shares each), the total par value of the issued preferred stock is $1,310,000,000 (52,400 shares * $25,000/share). The actual capital raised would depend on the offering price, which is referenced in the prospectus supplement.