Giant Banker Bank of America Sells a Preferred Issue

Bank of America  (NYSE:BAC) has sold a new preferred stock offering. Being a banking company the issue is required to be non-cumulative (if dividends are not declared they are gone forever) and as typical the shares are perpetual (having no stated maturity date).  The issue is NOT investment grade.

With this issue being less than investment grade you garner between .50% and .75% incremental yield as compared to recent investment grade issues.  Obviously you give up a little safety for the higher dividend.

The issue has the normal 5 year optional redemption (the company can redeem the shares at their option as early as 4/25//2021).  Typically the issuer will redeem the shares in what we call a “refinancing” transaction on the optional redemption date if they can issue new shares at a coupon at least ¼ to ½% below the coupon on these shares.

Shares are now trading on the OTC Grey Market under temporary ticker BACMP and is trading between $25 and $25.10 per share.

Complete details of this offering can be found here.

To compare this issue with other Bank of America preferred issues outstanding you can easily check them on our “swaps” page.  The company has 11 other traditional preferred issues outstanding.  Some of these issues are original Merrill Lynch issues which Bank of America acquired many years ago.

For those interested in buying on the OTC Grey Market we have a “primer” on the process which you can access at this link.