By Jonathan Stempel
NEW YORK, May 28 (Reuters) - Bank of America Corp said on Thursday it may swap 200 million common shares for existing preferred stock, moving at least $2 billion closer to plugging a $33.9 billion capital shortfall.
The largest U.S. bank announced the exchange offer a day after it said it had raised close to $26 billion of equity capital this month, including $5.9 billion from another swap of common shares for preferred stock.
Bank of America said it might issue 564 million shares from similar swaps, and that Chief Executive Kenneth Lewis owns 86,000 preferred shares eligible for the latest swap.
Two hundred million common shares are worth about $2.26 billion, based on the bank's Thursday closing price of $11.30.
For the exchange offer to succeed, the average stock price for the five days ending June 22 must be at least $10. The offer expires June 24.
Bank of America is 'making good progress in raising capital,' wrote RBC Capital Markets analyst Joe Morford. 'It now appears that Bank of America could well raise more than the government requires.' He rates the bank 'sector perform.'
Earlier this month, federal regulators ordered Bank of America and nine other large U.S. lenders to raise a combined $74.6 billion of capital after government 'stress tests' of their ability to handle a deep recession.
Bank of America's $33.9 billion hole was more than twice as large as that identified at any other lender.
The bank originally planned to raise $17 billion by issuing common shares, as well as $10 billion from asset sales and $7 billion from other actions, including improved revenue streams.
According to The Wall Street Journal, the Federal Reserve is limiting the extent to which banks may fill capital holes from higher revenue. It said Bank of America may use only $1.7 billion of excess revenue, not $7 billion, for this purpose.
Spokesman Scott Silvestri declined to comment on the report, or on Lewis' plans to swap his preferred shares. It did not mention plans to raise $7 billion of revenue in statements on Wednesday or Thursday regarding its capital-raising plans.
Bank of America has indicated it would like at least to begin by late this year repaying its $45 billion taken from the Treasury Department's federal Troubled Asset Relief Program.
Morford, the RBC analyst, said, 'We view this timeline as optimistic and are unsure the Treasury would even allow repayment that soon.'
Bank of America said it had about 7.92 billion common shares outstanding as of May 26, including roughly 1.5 billion issued this month.
(Reporting by Jonathan Stempel, editing by Dave Zimmerman) Keywords: BANKOFAMERICA/CAPITAL (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, May 28 (Reuters) - Bank of America Corp said on Thursday it may swap 200 million common shares for existing preferred stock, moving at least $2 billion closer to plugging a $33.9 billion capital shortfall.
The largest U.S. bank announced the exchange offer a day after it said it had raised close to $26 billion of equity capital this month, including $5.9 billion from another swap of common shares for preferred stock.
Bank of America said it might issue 564 million shares from similar swaps, and that Chief Executive Kenneth Lewis owns 86,000 preferred shares eligible for the latest swap.
Two hundred million common shares are worth about $2.26 billion, based on the bank's Thursday closing price of $11.30.
For the exchange offer to succeed, the average stock price for the five days ending June 22 must be at least $10. The offer expires June 24.
Bank of America is 'making good progress in raising capital,' wrote RBC Capital Markets analyst Joe Morford. 'It now appears that Bank of America could well raise more than the government requires.' He rates the bank 'sector perform.'
Earlier this month, federal regulators ordered Bank of America and nine other large U.S. lenders to raise a combined $74.6 billion of capital after government 'stress tests' of their ability to handle a deep recession.
Bank of America's $33.9 billion hole was more than twice as large as that identified at any other lender.
The bank originally planned to raise $17 billion by issuing common shares, as well as $10 billion from asset sales and $7 billion from other actions, including improved revenue streams.
According to The Wall Street Journal, the Federal Reserve is limiting the extent to which banks may fill capital holes from higher revenue. It said Bank of America may use only $1.7 billion of excess revenue, not $7 billion, for this purpose.
Spokesman Scott Silvestri declined to comment on the report, or on Lewis' plans to swap his preferred shares. It did not mention plans to raise $7 billion of revenue in statements on Wednesday or Thursday regarding its capital-raising plans.
Bank of America has indicated it would like at least to begin by late this year repaying its $45 billion taken from the Treasury Department's federal Troubled Asset Relief Program.
Morford, the RBC analyst, said, 'We view this timeline as optimistic and are unsure the Treasury would even allow repayment that soon.'
Bank of America said it had about 7.92 billion common shares outstanding as of May 26, including roughly 1.5 billion issued this month.
(Reporting by Jonathan Stempel, editing by Dave Zimmerman) Keywords: BANKOFAMERICA/CAPITAL (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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