BofA to raise up to $3 billion in stock issuance, reduce debt
Bank of America (BAC) intends to explore the issuance of common stock and senior notes in exchange for shares of preferred stock. The exchange, which could involve up to 400 million common shares, would generate $2.57 billion based on Friday’s closing price of $6.49. The bank plans to use proceeds to reduce debt. This announcement, which was stated in its quarterly financial report, comes after months of it saying that it did not plan to sell new shares. BofA shares were down nearly 4% early Friday, worse than the broader market, after the bank made the disclosure last night. From BofA’s quarterly financial report: "The senior notes and common stock would be recorded at fair value at issuance, which is expected to be less than the par and carrying value of the preferred stock and/or junior subordinated debt, which would result in the exchanges being accretive to earnings per common share for the period in which completed." BofA said it cannot predict any impact the offering may have on current trading, but said there are limits to what it is willing to do. "We will not issue more than 400 million shares of common stock or $3 billion in new senior notes in connection with these exchanges," the report states. Write to Justin T. Hilley. Follow him on Twitter @JustinHilley.