8-KShareholder MattersCorporate ChangesOther Events+1

BANK OF AMERICA CORP /DE/ 8-K Report, Rights Modification (Jan 24, 2020)

Filed January 24, 2020For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

This 8-K filing by Bank of America Corporation (BAC) on January 24, 2020, primarily details the issuance and sale of new preferred stock and associated depositary shares. Specifically, the company filed a Certificate of Designations to create Series MM Fixed-to-Floating Rate Non-Cumulative Preferred Stock. A significant portion of this filing relates to the sale of 1,100,000 Depositary Shares, each representing a fraction of a Series MM Preferred Stock share, conducted under a prospectus supplement dated January 21, 2020. Investors should note the terms associated with the Series MM Preferred Stock, particularly the restrictions placed on the company's ability to pay common stock dividends or repurchase shares if full dividends on the preferred stock are not met. This structure is typical for preferred stock offerings and aims to provide a fixed income stream to preferred shareholders while introducing certain protective covenants for them.

Key Highlights

  • 1Bank of America Corporation filed a Certificate of Designations to establish Series MM Fixed-to-Floating Rate Non-Cumulative Preferred Stock.
  • 2The company issued 44,000 shares of Series MM Preferred Stock.
  • 3Bank of America sold 1,100,000 Depositary Shares, each representing a 1/25th interest in a share of Series MM Preferred Stock.
  • 4The Series MM Preferred Stock has a liquidation preference of $25,000 per share.
  • 5Restrictions are in place on common stock dividend payments and repurchases if dividends on the Series MM Preferred Stock are not paid in full.
  • 6The offering of Depositary Shares was made under a Prospectus Supplement dated January 21, 2020, referencing a previous Form S-3 registration statement.
  • 7The filing includes various exhibits detailing the underwriting agreement, certificate of designations, deposit agreement, and legal opinions.

Frequently Asked Questions

The Series MM Preferred Stock is a new class of fixed-to-floating rate, non-cumulative preferred stock established by Bank of America. It has a liquidation preference of $25,000 per share and carries specific dividend and repurchase restrictions tied to its own dividend payments.

Depositary Shares are securities that represent an ownership interest in a portion of a foreign security, in this case, Bank of America's Series MM Preferred Stock. Each Depositary Share represents a 1/25th interest in one share of the Series MM Preferred Stock, making it easier to trade smaller denominations of the preferred stock.

The primary impact on common shareholders is a potential restriction on dividend payments or share repurchases by Bank of America if the company fails to declare and pay full dividends on the Series MM Preferred Stock. This covenant protects preferred shareholders by prioritizing their dividend payments.

The purpose of this 8-K filing is to officially announce the creation and terms of the Series MM Preferred Stock, and to report on the subsequent sale of Depositary Shares representing interests in this preferred stock. It fulfills the company's disclosure obligations regarding these material events.