Bank to raise $38b, exceeding US goal
CHARLOTTE, N.C. - Bank of America Corp. reported yesterday that it will raise more money than the government said it needed.
Upon the completion of a debt exchange, the bank will have raised $38 billion, or $4.1 billion more than the $33.9 billion the Federal Reserve said the bank needed to protect against potential losses should the economy worsen.
The move was largely expected within the investment community.
What was not expected was the speed with which the bank raised the money, said Tony Plath, a finance professor at the University of North Carolina.
“Remember, they were essentially given 30 days to submit a plan. Heck, they raised the capital in 30 days,’’ Plath said.
“That’s proof that they have credibility in the capital market and that they did have residual assets that they could in turn dispose of in order to raise capital.’’
The bank has preliminarily agreed to exchange $3.9 billion in depository shares for common stock as part of a debt exchange offer.
Settlement of the exchange, which was oversubscribed, is expected to be completed today.
The bank, based in Charlotte, has also agreed to convert about $10.7 billion in preferred stock into 789 million shares of common stock.
