CHARLOTTE, N.C. -- Bank of America Corp. is unlikely to name a new chief executive until next week, because of a stipulation in the securities offering the Charlotte bank used to pay back government aid.
According to a securities filing, the bank must wait five business days from Wednesday before any event occurs that would make previous disclosures related to the offering "untrue."
Naming a new CEO would constitute such an event. If the bank did announce a new leader before mid-next week, it would have to notify the investment firms underwriting the securities and make new disclosures, tripping up the offering.
In a filing last week, the bank said the selection of a new CEO to replace the departing Ken Lewis was in an "advanced stage" but didn't provide a timeline for naming the bank's next leader. Lewis, under fire for his Merrill Lynch & Co. acquisition, announced Sept. 30 that he is leaving at the end of the year.
According to Wednesday's filing, it appears the bank would be unlikely to announce a material event until Dec. 16, although underwriters could extend that period. The bank declined to comment on Wednesday's filing.
Tom Hazen, who teaches securities law at UNC Chapel Hill, said he believes that such arrangements are not uncommon. "The prospectus (for the offering) discloses all the material facts, so if something happens that changes what it says, then the prospectus isn't good anymore," Hazen explained. "Companies usually plan disclosures so that in the period following the disclosure there will not be any surprises."
Wednesday's filing came as the bank officially wired the U.S. Treasury $45 billion to repay U.S. taxpayers for all loans received under the Troubled Asset Relief Program.
The bank announced last week that it would repay the government after the completion of a securities offering that ultimately raised $19.3 billion for the bank.
In a securities offering, a company sells stock to investment firms known as underwriters, which then place the securities with other investors. Bank of America lists more than two dozen underwriters for its offering, including its Merrill unit.
In repaying TARP, Bank of America repurchased all of the preferred shares it issued to the Treasury. It also paid the government $190 million in dividends owed on the preferred securities.
The Treasury continues to hold warrants to buy Bank of America common stock that were issued as part of the preferred shares. The bank hasn't announced plans for buying those back.
To boost capital levels, the government also has required Bank of America to increase its equity by about $3 billion by selling assets.
The sales must be approved by the Federal Reserve Board and be under contract by June 30.
The bank is also raising $1.7 billion by issuing restricted stock in lieu of a portion of cash to certain employees as part of year-end bonuses.
After paying back TARP and taking the other actions, the bank said it would have a Tier 1 capital ratio of 11 percent, well above the 6 percent required by regulators.
Its Tier 1 common capital ratio, another measure of the bank's ability to absorb losses, would be at 8.4 percent, above the 4 percent minimum favored by regulators. Staff writer Christina Rexrode contributed.
