Bank of America (NYSE: BAC) completed a move to trade preferred shares for common stock and debt, a move that will create $3.9 billion in additional capital for the company.

Under the plan, 400 million shares of common stock were sold and $2.3 billion in new debt was taken on to repurchase the preferred stock. The Charlotte-based bank spent around $4.7 billion to repurchase approximately $5.8 billion in preferred stock. The action raised Bank of America’s Tier 1 common capital by $3.9 billion and raised its ratio of capital to risk assets by 0.29%, the Wall Street Journal reported. Bank of America first announced the plan last month and has since given occasional updates on its process. The company disclosed its final numbers in a filing on Friday morning.

The Charlotte-based bank has been working to raise additional capital to meet new capital requirements. Bank of America has stated that it’s ahead of schedule in raising capital and will be in compliance when the new rules go into effect.

The company also has been trying to address critics that have been concerned that the bank’s mortgage losses could overwhelm its capital position. Bank of America CEO Brian Moynihan has repeatedly stated that a direct sale of new shares in order to boost capital is not needed. He said that sales of various assets, along with company earnings, would ensure that the bank meets global capital standards.

Bank of America’s debt, along with several other U.S. banks’, was downgraded by all three of the major ratings agencies. Fitch was the most recent company to cut the rating of Bank of America’s debt, from single-A-plus to single-A. Fitch said that it will be harder for the government to step in and save Bank of America with taxpayer funds. Fitch also said that Bank of America would continue to lag behind its peers, including Citigroup, JPMorgan Chase and Wells Fargo.

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  1. John Underwood

    I’m dissapointed that BOfA is diluting existing investors. This wouldn’t have to happen if management had its act together.


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