01—Abstract
Summary
Summary of the 8-K filed June 21, 2024. Cited figures are marked; the original filing is the authoritative source.
On June 21, 2024, Bank of America (NYSE: BAC) filed an 8-K under Item 8.01 (Other Events) attaching a press release that addresses the discontinuation of the Canadian Dollar Offered Rate (CDOR) for certain outstanding debt securities.
The CDOR administrator, Refinitiv Benchmark Services (UK), will permanently cease publication of all remaining CDOR tenors, including Three-Month CDOR, after its final publication on Friday, June 28, 2024. For the securities covered, Three-Month Fallback Rate (CORRA), calculated by Bloomberg Index Services Limited, will replace Three-Month CDOR as the base rate for floating-rate interest periods commencing on or after the CDOR Replacement Date (the first Toronto banking day after June 28, 2024). The filing is administrative in nature and does not involve financial results, new capital actions, or a change in the Corporation's financial condition.
The securities are divided into three categories. Annex 1 notes (four series) have fallback provisions that let the calculation agent, Merrill Lynch Canada Inc., select CORRA as the alternative rate. Annex 2 notes (two series) contain CARR-recommended fallback language, and BAC has determined that an index cessation event occurs on the replacement date.
Annex 3 covers a single series, the 3.407%a Fixed/Floating Rate Senior Notes due September 2025 (CUSIP 060505FG4), whose contractual fallbacks are considered non-workable. BAC therefore intends to redeem that series before its floating-rate period begins. The press release states that it is not a formal notice of redemption, which will be issued separately under the indenture.
For holders, the key implications are a change in the reference rate and a modified calculation methodology. CORRA is compounded in arrears and is applied with a fixed spread adjustment of 0.32138%b, so coupon amounts will be known only near the end of each interest period rather than at its start.
Holders of the Annex 3 notes should expect early redemption, which could create reinvestment risk. The filing is a routine, disclosure-driven update with limited direct impact on BAC's overall financial profile, though it is relevant to holders of these specific debt securities.
02—Key points
Key Highlights
- CDOR, the Canadian Dollar Offered Rate, will permanently cease after its final publication on June 28, 2024, and the Three-Month tenor is affected.
- Three-Month Fallback Rate (CORRA), provided by Bloomberg Index Services Limited, will replace Three-Month CDOR as the base rate for floating-rate periods starting on or after the CDOR Replacement Date.
- Annex 1 notes (four series) use an alternative rate chosen by calculation agent Merrill Lynch Canada Inc.; the CORRA-based rate is applied with a 0.32138% fixed spread adjustment.
- Annex 2 notes (two series, CUSIPs 060505GF5 and 060505GE8) use CARR-recommended fallback provisions, and an index cessation event has already been determined to have occurred.
- BAC intends to redeem the 3.407% Fixed/Floating Rate Senior Notes due September 2025 (CUSIP 060505FG4, Annex 3) before their floating-rate period begins, because their contractual fallbacks are non-workable.
- The 8-K is a disclosure under Item 8.01 (Other Events) and does not change BAC's financial results, capital position, or guidance.
- Compounded-in-arrears CORRA means coupon amounts will be determined near the end of each interest period, not at its start, which changes cash-flow timing for affected holders.
03—Questions
Frequently Asked Questions
Why is BAC changing the base rate on these debt securities?
The administrator of CDOR, Refinitiv Benchmark Services (UK) Limited, announced in May 2022 that it would permanently cease publishing all remaining CDOR tenors, including Three-Month CDOR, after a final publication on June 28, 2024. The securities need a replacement reference rate, and the Canadian Alternative Reference Rate Working Group recommended Fallback Rate (CORRA) as that replacement.
When does the change take effect, and which interest periods are affected?
The change applies on the first Toronto banking day after June 28, 2024 (the CDOR Replacement Date). It affects floating-rate interest periods whose start dates and interest determination dates fall on or after that date. Periods whose determination dates occurred before the replacement date are not affected.
How will the interest rate be calculated under the new benchmark?
Three-Month Fallback Rate (CORRA) is based on the daily Canadian Overnight Repo Rate Average, compounded in arrears over the three-month period, plus a fixed spread adjustment of 0.32138%. Because it is compounded in arrears, the rate can only be finalized near the end of each interest period, unlike the forward-looking CDOR term rate, which was set at the start. Holders should expect a different timing and possibly a different amount of interest from the prior CDOR-based coupons.
Are any of the securities being redeemed early?
Yes. BAC intends to redeem the 3.407% Fixed/Floating Rate Senior Notes due September 2025 (CUSIP 060505FG4) before their floating-rate period starts, because their contractual fallback provisions would not work after CDOR ends. The press release is not a formal redemption notice. Any notice will be issued separately under the terms of the notes and the governing indenture, so holders should watch for that notice and review its terms.
Does this filing affect Bank of America's financial performance?
The filing does not report financial results, earnings, capital changes, or guidance. It is an administrative disclosure about the reference rate for specific outstanding debt securities. Its effect on BAC's overall financial condition is expected to be limited, although it matters to the holders of the affected series.
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