Bank of America (BAC) said Thursday that it might issue 400 million new shares and disclosed plans to exchange preferred securities for a total of $6 billion of common shares and debt. The moves come after repeated statements by CEO Brian Moynihan that it would not issue new shares.
The plans were disclosed in BofA’s quarterly filing to the Securities and Exchange Commission, which also stated that the bank may need to post nearly $10 billion in additional collateral against derivatives contracts if it suffers more credit-rating downgrades.
“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,” the bank said in its SEC filing.
BofA stock has declined sharply this year and traded at roughly $6.60 per share on Friday, off roughly 4.5%. Over the past 12 months, it has fallen about 40% vs. a decline in the same period of the S&P and Dow Jones of approximately 5%. In the last six months, it dropped 45%, while the major indexes have moved down less than 10%.