BAC-WT - Bank of America Warrants

[rohitc99]

I noticed the following statement from 2011 annual report (pg118).

 

We estimate that the fair value of all reporting units in aggregate as of the June 30, 2011 annual goodwill impairment test was $210.2 billion and the common stock market capitalization of the Corporation as of that date was $111.1 billion ($58.6 billion at December 31, 2011). As none of our reporting units are publicly-traded, individual reporting unit fair value determinations do not directly correlate

to the Corporation’s stock price. Although we believe it is reasonable to conclude that market capitalization could be an indicator of fair value over time, we do not believe that recent fluctuations in our market capitalization reflect the fair value of our individual reporting units.

 

so as per the company, they would value the company at around 20$ a share

 

[ERICOPOLY]

Eirc,

 

Is this the presentation you want to see?

 

http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-eventDetails&EventId=4783486

 

 

That's the audio webcast.

 

My complaint is that every single time, EXCEPT THIS TIME, they post the slides here:

 

http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-presentations

 

Citigroup does a much better job.  Citigroup posts not only the slides, but the entire transcripts of the presentations including the Q&A.  They leave them up there as an archive, whereas BofA is going to permanently remove that webcast replay link before they have the next presention.  And BofA has never posted the transcript.

 

Come to think of it, this time there doesn't seem to have been any presentation.  They seemed to go straight into the Q&A.

[bmichaud]

Not sure how many have heard the webcast, but it's well worth listening to.  Moynihan may not be as charismatic as Stumpf or Dimon, but he's definitely in the same category.  He knows his numbers, he knows his company inside out and he knows the industry as well as anyone.  Cheers!

 

 

 

Sanjeev, you're spot on!! He knows this thing inside and out, and is extremely crisp with his outlook for cost-cutting, capital management and the integrated product offering BAC is making more WFC-like.

[nkp007]

Not sure how many have heard the webcast, but it's well worth listening to.  Moynihan may not be as charismatic as Stumpf or Dimon, but he's definitely in the same category.  He knows his numbers, he knows his company inside out and he knows the industry as well as anyone.  Cheers!

 

 

 

Sanjeev, you're spot on!! He knows this thing inside and out, and is extremely crisp with his outlook for cost-cutting, capital management and the integrated product offering BAC is making more WFC-like.

 

I listened to it. Fell asleep towards the end so had to re-listen to it. It's obviously a bit dry, but the information is great. Great convo on net interest margin, recurring legal costs, and hoarding capital.

[txlaw]

BAC transcript

 

Awesome, thanks.

[PlanMaestro]

Thanks for posting the transcript.  The sound quality of the DB presentations was terrible.  I tried to listen to JPM, BAC & RF and none of them sounded good.

 

Thanks bmichaud for both transcripts (AIG and BAC), it was very tough listening especially for a foreigner.

[nkp007]

Not sure if I missed this, but I was reading to the prospectus and I understand that for distributions / dividends, the strike price of $13.30 will be adjusted downwards by almost the entire amount.

 

However, there is also some language about the shares per warrant increasing. I'm not sure if I'm misreading...is it accurate that whenever a distribution is made, each warrant results in more shares?!

[merkhet]

 

Not sure if I missed this, but I was reading to the prospectus and I understand that for distributions / dividends, the strike price of $13.30 will be adjusted downwards by almost the entire amount.

 

However, there is also some language about the shares per warrant increasing. I'm not sure if I'm misreading...is it accurate that whenever a distribution is made, each warrant results in more shares?!

 

 

You're correct on the increase of shares...

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chou-funds-2011-annual-report/msg73665/#msg73665

 

... however, I think you're slightly off on the downward adjustment.  It's a function of the percentage of the dividend as compared to the market price of the shares on the record date -- so it's not like a 10 cent dividend makes the strike $13.20...

[nkp007]

 

Not sure if I missed this, but I was reading to the prospectus and I understand that for distributions / dividends, the strike price of $13.30 will be adjusted downwards by almost the entire amount.

 

However, there is also some language about the shares per warrant increasing. I'm not sure if I'm misreading...is it accurate that whenever a distribution is made, each warrant results in more shares?!

 

 

You're correct on the increase of shares...

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chou-funds-2011-annual-report/msg73665/#msg73665

 

... however, I think you're slightly off on the downward adjustment.  It's a function of the percentage of the dividend as compared to the market price of the shares on the record date -- so it's not like a 10 cent dividend makes the strike $13.23...

 

Much appreciated. Thank you.

[obtuse_investor]

Mark your calendars...

 

Bank of America to Present at the Sanford C. Bernstein 28th Annual Strategic Decisions Conference

 

CHARLOTTE, N.C. (Business Wire) -- Bank of America Chief Executive Officer Brian Moynihan will present at the Sanford C. Bernstein 28th Annual Strategic Decisions Conference in New York on Wednesday, May 30, 2012 at 10 a.m. Eastern Time. A live audio webcast of the presentation will be accessible through the Bank of America Investor Relations Web site at http://investor.bankofamerica.com.

[redskin]

 

Not sure if I missed this, but I was reading to the prospectus and I understand that for distributions / dividends, the strike price of $13.30 will be adjusted downwards by almost the entire amount.

 

However, there is also some language about the shares per warrant increasing. I'm not sure if I'm misreading...is it accurate that whenever a distribution is made, each warrant results in more shares?!

 

 

You're correct on the increase of shares...

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chou-funds-2011-annual-report/msg73665/#msg73665

 

... however, I think you're slightly off on the downward adjustment.  It's a function of the percentage of the dividend as compared to the market price of the shares on the record date -- so it's not like a 10 cent dividend makes the strike $13.23...

 

The way that I read the prospectus regarding dividend adjustments is that they will take the market price the day before the ex-dividend date subtracted by the dividend in excess of 0.01 and divide that by the market price.  This ratio is then multiplied by the exercise price to create the new exercise price.  For example, if the market price is $10 before the ex-dividend date and they issue a dividend of 0.51 the formula would be... (10-.50)/10= .95  (.95)(13.3)= 12.63

 

The new strike price would therefore be 12.63.  If this is correct then the adjustments would be greater the lower the current market price.

[PlanMaestro]

Bank of America to Sell 12-Building Office Campus in New Jersey

http://www.businessweek.com/news/2012-05-23/bank-of-america-to-sell-12-building-office-campus-in-new-jersey

 

The bank, led by Chief Executive Officer Brian T. Moynihan, said in February it may sell all its offices except its headquarters building in Charlotte, North Carolina, and its stake in the Bank of America Tower at 1 Bryant Park in Manhattan. The New Jersey property may fetch about $400 million, making it the biggest office sale ever in the state, the newsletter Real Estate Alert said today, attributing its information to “market players.”

 

“As Brian Moynihan has said, commercial real estate ownership is not a core business for Bank of America, which is why we made our decision to sell our interest in the Hopewell campus,” Crawford said.

 

 

 

[merkhet]

 

The way that I read the prospectus regarding dividend adjustments is that they will take the market price the day before the ex-dividend date subtracted by the dividend in excess of 0.01 and divide that by the market price.  This ratio is then multiplied by the exercise price to create the new exercise price.  For example, if the market price is $10 before the ex-dividend date and they issue a dividend of 0.51 the formula would be... (10-.50)/10= .95  (.95)(13.3)= 12.63

 

The new strike price would therefore be 12.63.  If this is correct then the adjustments would be greater the lower the current market price.

 

 

That's correct. The lower the stock price during each adjustment the better -- though a truly low price may not come to pass as an increase in dividend is likely to increase the share price...

[StubbleJumper]

Bank of America to Sell 12-Building Office Campus in New Jersey

http://www.businessweek.com/news/2012-05-23/bank-of-america-to-sell-12-building-office-campus-in-new-jersey

 

The bank, led by Chief Executive Officer Brian T. Moynihan, said in February it may sell all its offices except its headquarters building in Charlotte, North Carolina, and its stake in the Bank of America Tower at 1 Bryant Park in Manhattan. The New Jersey property may fetch about $400 million, making it the biggest office sale ever in the state, the newsletter Real Estate Alert said today, attributing its information to “market players.”

 

“As Brian Moynihan has said, commercial real estate ownership is not a core business for Bank of America, which is why we made our decision to sell our interest in the Hopewell campus,” Crawford said.

 

 

That makes perfect sense.  ScotiaBank just completed the sale and leaseback of its office tower in Toronto, which apparently effectively converted a $1B+ asset that wasn't eligible capital under Basel III into equity which is eligible under Basel III.  Presume that this would be the same motivation for BAC?  Article about BNS building sale can be seen here:  http://www.huffingtonpost.ca/2012/05/22/scotiabank-tower-sale_n_1537576.html

 

 

SJ

[Mephistopheles]

Do the strike price readjustment and increase in warrant shares provisons apply to share buy backs as well? Or only to dividends in excess of the threshold? This is from the prospectus but wasn't sure what a "pro rata repurchase" was.

 

In the case of a pro rata repurchase of common stock. A “pro rata repurchase” is defined as any purchase of shares of our common stock by us or an affiliate of ours pursuant to any tender offer or exchange offer subject to Section 13(e) or 14(e) of the Exchange Act, or Regulation 14E thereunder, or any other offer available to substantially all holders of our common stock. If we effect a pro rata repurchase of our common stock, then the exercise price will be reduced to the price determined by multiplying the exercise price in effect immediately prior to the effective date (as defined below) of such pro rata repurchase by a fraction of which (A) the numerator will be (i) the product of (x) the number of shares of our common stock outstanding immediately before such pro rata repurchase and (y) the market price of a share of our common stock on the trading day immediately preceding the first public announcement by us or any of our affiliates of the intent to effect such pro rata repurchase, minus (ii) the aggregate purchase price of the pro rata repurchase, and (B) the denominator will be the product of (i) the number of shares of our common stock outstanding immediately prior to such pro rata repurchase minus the number of shares of our common stock so repurchased and (ii) the market price per share of our common stock on the trading day immediately preceding the first public announcement by us or any of our affiliates of the intent to effect such pro rata repurchase. The number of warrant shares will be increased to the number obtained by multiplying the number of warrant shares immediately prior to such adjustment by the quotient of (x) the exercise price in effect immediately prior to the pro rata repurchase giving rise to this adjustment divided by (y) the new exercise price as determined in accordance with the immediately preceding sentence. For the avoidance of doubt, no increase to the exercise price or decrease in the number of warrant shares deliverable upon exercise of a warrant will be made pursuant to this adjustment provision. The “effective date” of a pro rata repurchase means (a) the date of acceptance of shares for purchase or exchange by us under any tender offer or exchange offer which is a pro rata repurchase or (b) the date of purchase of any pro rata repurchase that is not a tender offer or exchange offer.

[Rabbitisrich]

It refers to a tender or exchange offer, so the specificity implies that open market purchases aren't covered. However, it makes sense to remain agnostic on the issue because an open market bid is arguably an offer to "substantially all holders".

 

The intent seems to be to exclude open market bids. BAC adjusts for stock dividends but not for issuances.

[ERICOPOLY]

A few weeks ago BAC announced that they are forgiving an average of $150,000 on 200,000 loans.

 

$30 billion dollars.

 

Questions:

A)  Huge loss this quarter due to this?

B)  Loans already written down and/or losses reserved for?

 

 

[Uccmal]

my choice is B.  This was part of the agreement that BAC made with the feds that was in negotiation for some time. 

[onyx1]

A few weeks ago BAC announced that they are forgiving an average of $150,000 on 200,000 loans.

 

$30 billion dollars.

 

Questions:

A)  Huge loss this quarter due to this?

B)  Loans already written down and/or losses reserved for?

 

My expectation is also B). 

 

Page 82, 10-Q:

"The outstanding balance of a real estate- secured loan that is in excess of the estimated property value, after reducing the estimated property value for estimated costs to sell, is charged off no later than the end of the month in which the loan becomes 180 days past due unless repayment of the loan is fully insured."

 

I don't believe BAC would forgive loan principal unless the mortgagee is severely delinquent.

[Parsad]

A few weeks ago BAC announced that they are forgiving an average of $150,000 on 200,000 loans.

 

$30 billion dollars.

 

Questions:

A)  Huge loss this quarter due to this?

B)  Loans already written down and/or losses reserved for?

 

B)  They commented on this at the time of that press release.  The bulk is already reserved and the rest will come out of operating cash flows.  Cheers!

[CONeal]

A few weeks ago BAC announced that they are forgiving an average of $150,000 on 200,000 loans.

 

$30 billion dollars.

 

Questions:

A)  Huge loss this quarter due to this?

B)  Loans already written down and/or losses reserved for?

 

Here are some interesting things to note regarding the forgiven loans.

 

1) the loan has to be owned by BAC if they sold it to Freddie or Fannie or someone else you not eligible.

2) you will receive a letter in the mail (if you qualify) if you throw that letter away or not able to provide that letter to BAC for any reason at all you will lose your eligibility for the the program.

 

How many people will toss the letter thinking it's junk mail?  I'm betting quite a few.

[ERICOPOLY]

$30b of principal forgiveness is something like:

 

1)  240% of the settlement amount

2)  94% of their entire loan loss reserve

 

They must have already written down most of these loans -- probably as part of that requirement to mark non-performing loans to value after a period of time (including the costs of throwing the person out, cleanup, realtors, etc...)

 

 

[nkp007]

Bank of America Corporation at Sanford C. Bernstein & Co. Strategic Decisions Conference

Wednesday, May 30, 2012 10:00 a.m. ET 

 

http://investor.bankofamerica.com/phoenix.zhtml?p=irol-eventDetails&c=71595&eventID=4785419

 

Notes:

 

U.S. environment:

-Consumer spending up 6% May 2012 vs May 2011

-$40k/$50k earners are spending money, they're feeling better and better

-The american consumer is pushing ahead, steady as you go

 

Europe:

-We can control direct effects, need to keep an eye on second and third order effects, e.g. negative growth, negative capital market effects

 

Expenses:

-10K less employees March 2012 vs March 2011. Legacy Asset Services gained 10K, lost 20k everywhere else

-1 million loans that are 60+ days past due, was 1.6mm 6 quarters ago. Goal of 200K/300K loans 60+ past due

-Cost of servicing these bad loans is $8B annually, should be closer to $2B annually

-Legacy asset services should plateau in the 2nd half of this year

 

[Grenville]

Thanks for the summary!

 

Bank of America Corporation at Sanford C. Bernstein & Co. Strategic Decisions Conference

Wednesday, May 30, 2012 10:00 a.m. ET 

 

http://investor.bankofamerica.com/phoenix.zhtml?p=irol-eventDetails&c=71595&eventID=4785419

 

Notes:

 

U.S. environment:

-Consumer spending up 6% May 2012 vs May 2011

-$40k/$50k earners are spending money, they're feeling better and better

-The american consumer is pushing ahead, steady as you go

 

Europe:

-We can control direct effects, need to keep an eye on second and third order effects, e.g. negative growth, negative capital market effects

 

Expenses:

-10K less employees March 2012 vs March 2011. Legacy Asset Services gained 10K, lost 20k everywhere else

-1 million loans that are 60+ days past due, was 1.6mm 6 quarters ago. Goal of 200K/300K loans 60+ past due

-Cost of servicing these bad loans is $8B annually, should be closer to $2B annually

-Legacy asset services should plateau in the 2nd half of this year

[meiroy]

Bank of America Corporation at Sanford C. Bernstein & Co. Strategic Decisions Conference

Wednesday, May 30, 2012 10:00 a.m. ET 

...

Europe:

-We can control direct effects, need to keep an eye on second and third order effects, e.g. negative growth, negative capital market effects

...

 

I do not understand this sentence.  Is it even possible that the mess there will result only in "direct effects"?