[Barrons] Bank of America Exploring Issuing Common Stock

Bank of America (BAC) said in a regulatory filing that it is exploring the idea of issuing common stock that it would exchange for preferred shares and trust preferred capital debt securities in private transactions. BAC shares fell 1.7% after hours.

The announcement is on page 10 of the the company’s 10-Q that it just released.

“The uncertainty in the market evidenced by, among other things, volatility in credit spread movements, makes it economically advantageous at this time to consider retirement of issued junior subordinated debt and preferred stock. As a result of these matters, we intend to explore the issuance of common stock and senior notes in exchange for shares of preferred stock and, subject to any required amendments to the applicable governing documents, certain trust preferred capital debt securities (Trust Securities) issued by unconsolidated trust companies, in privately negotiated transactions. If we pursue the exchange of Trust Securities, we would immediately use the purchased Trust Securities to retire a corresponding amount of our junior subordinated debt that we previously issued to the unconsolidated trust companies. These transactions would increase Tier 1 common capital and, on an after-tax basis, reduce the combined level of interest expense and dividends paid on the combined junior subordinated debt and preferred stock. The senior notes and common stock would be recorded at fair value at issuance, which is expected to be less than the par and carrying value of the preferred stock and/or junior subordinated debt, which would result in theexchanges being accretive to earnings per common share for the period in which completed.The ultimate impact on earnings per common share is not expected to be significant for periods subsequent to the exchange and will not be known until the level of earnings per common share for the period and the exact combination of exchanged preferred stock and Trust Sec! urities are known.We will not issue more than 400 million shares of common stockor $3 billion in new senior notes in connection with these exchanges.”