BofA Sells $2.5 Billion of Bonds Amid Foreclosure Deal Talks
Bank of America Corp. (BAC) sold $2.5 billion of bonds as it nears a settlement on state and federal claims over faulty foreclosures that’s increasing investor confidence in credit of the biggest U.S. bank.
The transaction included $2 billion of 3.75 percent, five- year notes that yield 205 basis points more than similar- maturity Treasuries and $500 million of three-year, floating- rate securities that pay 155 basis points more than the three- month London interbank offered rate, according to data compiled by Bloomberg.
The cost to protect the debt of Charlotte, North Carolina- based Bank of America from losses decreased today as the lender, JPMorgan Chase & Co., Citigroup Inc. and two other firms are in advanced talks that may result in a settlement, which may exceed $20 billion, according to two people briefed on the matter who declined to be identified because the talks are private.
Credit-default swaps on Bank of America fell 4.5 basis points to 154 basis points as of 10:10 a.m. in New York, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
The contracts have dropped 27 basis points since June 27, the day before the lender agreed to pay $8.5 billion to resolve claims over sour mortgages made my investors including BlackRock Inc. Spreads on Bank of America’s bonds have narrowed 9 basis points over that span, according to Bank of America Merrill Lynch index data.
Prior Offering
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
In March, in its last offering of five-year, fixed-rate notes, Bank of America issued $1.5 billion of 3.625 percent debt that paid 172 basis points, or 1.72 percentage points, more than similar-maturity Treasuries, according to data compiled by Bloomberg.
The notes traded yesterday at 100.7 cents on the dollar to yield 3.45 percent, or 181 basis points more than similar- maturity Treasuries, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net.
To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.
BofA Sells $2.5 Billion of Bonds
Chris Keane/Bloomberg
A Bank of America Corp. sign is illuminated outside a branch in Charlotte, North Carolina.
A Bank of America Corp. sign is illuminated outside a branch in Charlotte, North Carolina. Photographer: Chris Keane/Bloomberg
July 7 (Bloomberg) -- Jason Tyler, senior vice president at Ariel Investments LLC, talks about the state of the banking industry and prospects for Bank of America Corp., JPMorgan Chase & Co. and other U.S. mortgage servicers to resolve state and federal claims over questionable foreclosures. Tyler speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Rate this Page
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.