Comments on: BofA’s state of denial http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Sandrew http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/comment-page-1/#comment-1332 Wed, 06 May 2009 16:50:20 +0000 http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/#comment-1332 Li’l help here… I’m very curious to hear how BAC can cover the shortfall by converting a part of the $45Bn they received under TARP.

By my recollection of the 8-K, they didn’t issue convertible preferred stock, but rather plain-old perpetual preferred stock plus some deep out-of-the-money warrants. But even if they did issue convertible preferred stock, how can they force conversion? Conversion is a right of the holder (i.e. Treasury). Sure, some converts have call options that, when the stock price exceeds the the conversion price, are effectively force-conversion options. But this requires two things: a) that the preferreds are callable and b) that the conversion option is in-the-money. Are either true? I thought the preferreds shares (i.e. TARP monies) were only repayable after 3 years, and only then conditional on being repaid with proceeds from a qualified equity issuance. Am I misremembering the terms of the TARP purchases?

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By: Sandrew http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/comment-page-1/#comment-1331 Wed, 06 May 2009 16:33:44 +0000 http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/#comment-1331 Alphin isn’t a banker. Don’t be fooled by the c-level title. He’s basically the Chief of Spin. Check out his bio here: http://newsroom.bankofamerica.com/index. php?s=20&item=40

It’s worth noting that the NYT got snowjob’d today. Not only did they report the Alphin quotes without checking whether they made any sense, they themselves reported this:

“The government’s determination that Bank of America doesn’t need as much capital as it has already received from taxpayers is an indication that even some of the most troubled banks may not need more government money than has been allocated to them.”

This is spinning bad news good and is not very good reporting.

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By: Rustbelt http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/comment-page-1/#comment-1328 Wed, 06 May 2009 16:01:53 +0000 http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/#comment-1328 Felix, the $34Bn is already counting toward the Tier 1 ratio, so converting it will only affect the TCE. If $11Bn makes a difference for a bank the size of BoA on their Tier 1 ratio being adequate or insufficient, then they would probably need more capital. Point being, $11Bn is probably insignificant for BoA’s ultimate capital position.
Giving up the FDIC guaranty, on the other hand, is something BoA won’t be able to do for some time.

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By: jonathan http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/comment-page-1/#comment-1327 Wed, 06 May 2009 15:49:38 +0000 http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/#comment-1327 I’d love it if you’d write more about the FDIC guarantee. The hypocrisy, some driven by the need to primp for the markets, in saying they’ll repay TARP but, oh by the way, we still want the guarantee.

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By: Ryan Freund http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/comment-page-1/#comment-1326 Wed, 06 May 2009 15:19:29 +0000 http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/#comment-1326 Felix, do you have any idea why BAC stock is skyrocketing on this news? It seems to me that $34 billion in dilution is not exactly good news, nor is it “better than expected”. What’s going on here?

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By: jck http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/comment-page-1/#comment-1316 Wed, 06 May 2009 13:12:56 +0000 http://blogs.reuters.com/felix-salmon/2009/05/06/bofas-state-of-denial/#comment-1316 Alphin is stating the obvious, BofA doesn’t need to convert all the $45 bn TARP money, if the shortfall is $34 bn.

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