Bank of America 2011 Annual Report Download - page 214

212 Bank of America 2011
beneficial interests in the assets of the respective capital trust,
which consist of a series of the Corporation’s junior subordinated
notes and a stock purchase contract for a specified series of the
Corporation’s preferred stock. The Corporation will remarket the
junior subordinated notes underlying each series of HITS on or
about the five-year anniversary of the issuance to obtain sufficient
funds for the capital trusts to buy the Corporation’s preferred stock
under the stock purchase contracts. Following the successful
remarketing of the notes and the subsequent purchase of the
Corporation’s preferred stock under the stock purchase contracts,
the preferred stock will constitute the sole asset of the applicable
trust.
In connection with the HITS, the Corporation entered into two
replacement capital covenants for the benefit of investors in
certain series of the Corporation’s long-term indebtedness
(Covered Debt). As of December 31, 2011, the Corporation’s
6.625% Junior Subordinated Notes due 2036 constitute the
Covered Debt under the covenant corresponding to the Floating-
Rate Preferred HITS and the Corporation’s 5.625% Junior
Subordinated Notes due 2035 constitute the Covered Debt under
the covenant corresponding to the Fixed-to-Floating Rate Preferred
HITS. These covenants generally restrict the ability of the
Corporation and its subsidiaries to redeem or purchase the HITS
and related securities unless the Corporation has obtained the
prior approval of the Federal Reserve if required under the Federal
Reserve’s capital guidelines, the redemption or purchase price of
the HITS does not exceed the amount received by the Corporation
from the sale of certain qualifying securities, and such replacement
securities qualify as Tier 1 capital and are not “restricted core
capital elements” under the Federal Reserve’s guidelines.
In 2011, as part of the exchange agreements described in Note
15 – Shareholders’ Equity, the Corporation issued 282 million
shares of common stock valued at $1.6 billion and senior notes
valued at $1.5 billion in exchange for $3.8 billion aggregate
liquidation amount of previously issued Trust Securities. Upon the
exchange, the Corporation immediately surrendered the Trust
Securities to the unconsolidated Trusts for cancellation, resulting
in the cancellation of an equal amount of junior subordinated notes
that had a carrying value of $4.3 billion, resulting in a gain on
extinguishment of debt of $1.2 billion. In addition, the Corporation
issued 26 million shares of common stock valued at $138 million
and senior notes valued at $505 million in exchange for $917
million aggregate liquidation amount of HITS. Upon the exchange,
the Corporation immediately surrendered the HITS to the
unconsolidated Trusts for cancellation, resulting in the cancellation
of an equal amount of junior subordinated notes that had a carrying
value of $915 million, and the cancellation of a corresponding
amount of the underlying stock purchase contract, resulting in a
$12 million loss on extinguishment of debt and an increase to
additional paid-in capital of $284 million. For additional information
regarding these exchanges, see Note 15 – Shareholders’ Equity.
The table below lists each series of Trust Securities or HITS,
and the corresponding aggregate liquidation preference covered
by the Exchange Agreements.
Negotiated Exchanges
(Dollars in millions)
HITS
Trust XIII
Trust XIV
Trust Securities
BAC Capital Trust I
BAC Capital Trust II
BAC Capital Trust III
BAC Capital Trust IV
BAC Capital Trust V
BAC Capital Trust VI
BAC Capital Trust VII (1)
BAC Capital Trust VIII
BAC Capital Trust X
BAC Capital Trust XI
BAC Capital Trust XV
NB Capital Trust II
NB Capital Trust III
NB Capital Trust IV
Fleet Capital Trust II
Bank of America Capital III
Fleet Capital Trust V
BankBoston Capital Trust III
BankBoston Capital Trust IV
MBNA Capital B
Total exchanged
Aggregate
Liquidation
Amount
Exchanged
$ 559
358
1
2
1
8
4
823
1,114
4
9
198
446
76
269
73
47
226
142
136
95
165
$ 4,756
(1) Notes were denominated in British Pound. Presentation currency is U.S. Dollar.
The Trust Securities Summary table details the outstanding
Trust Securities, HITS and the related Notes previously issued
which remained outstanding at December 31, 2011, as originated
by Bank of America Corporation and its predecessor companies
and subsidiaries, after consideration of the exchange agreements.
For additional information on Trust Securities for regulatory capital
purposes, see Note 18 – Regulatory Requirements and
Restrictions.