Bank of America today stated that it has raised almost $33 billion towards the 33.9 billion capital buffer identified by the Federal Reserves Supervisory Capital Assessment Program (SCAP) and now believes it will comfortable exceed that number.
The date, Bank of America has entered into agreements with certain holders of (non government) perpetual preferred shares to exchange their holdings of approximately $9.5 billion pf perpetual preferred stock into approximately 704 million shares of common stock. This results in a total benefit to Tier 1 common capital of $9.5 billion.
Other capital-enhancing elements already achieved include:
- $13.5 billion from the direct sale of common stock
- A capital gain from the sale of shares in China Construction Bank.
- A $2.1 billion benefit from the deferred tax asset due to the increase in Tier 1 capital.
- Approximately $1.3 billion in reduced dividends on preferred shares over 2009-2010 associated with the shares exchanged into common stock.
- Approximately a $2 billion benefit from other dispositions.
As of the of the company's capital, it could issue up to an additional 296 million common shares included in the number, as previously announced, Bank of America has offered to exchange more perpetual preferred stock for up to 200 million shares of common stock by the end of June under an exchange offer that commenced May 28, 2009. These exchanges would result in further reductions in preferred dividends.
"We are pleased to have nearly reached our goal this quickly", said Joe Price, CFO.
Bank of America hopes to use the majority of the proceeds from these initiatives to reduce reliance on government support for the company.
The company also recently raised long-term debt without government guarantees. Bank of America sold $3 billion in five-year notes on May 8th and $2.5 billion in 10 year notes on May 28th without Federal Deposit Insurance Corporation guarantees.
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