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BofA Doubles Preferred Stock Sale - Sources

David Russell,|Producer
Thursday, 24 Jan 2008 | 5:52 PM ET

Bank of America doubled its two preferred stock offerings to at least $12 billion after yield-hungry investors placed orders for more than twice the amount offered, according to people involved in the deal.

The Charlotte, N.C.-based lender issued $6 billion of preferred shares yielding 8 percent. It also plans to sell $6-7 billion of convertible preferred notes with a yield of 7-7.25 percent.

Bank of America spokeswoman Eloise Hale did not immediately return a call seeking comment.

Strong demand allowed the bank to reduce the yield on the convertibles from as high as 7.75 percent earlier in the day. Bank of America needs money after the subprime meltdown caused fourth-quarter earnings to plunge 95 percent.

Because some of the proceeds will be used as capital, today’s securities are ranked lower in the capital structure than other Bank of America debt. That’s why they yield 1.5-2 percentage points more than its senior bonds. It’s also more generous than the 6.8 percent forward yield on the common stock.

Bank of America wasn’t the only firm issuing preferred stock this week to shore up its capital after the mortgage crisis, but it was the largest. M&T Bank sold $350 million of securities with an 8.5 percent coupon, after increasing the size from $200 million and cutting the yield. National City, licking its wounds from a $333 million fourth-quarter loss, issued $500 million of perpetual notes with a 14 percent yield, according to Thomson Financial.

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