No. of Recommendations: 2
Has anyone else seen the exchange offer laid out by BAC a few days ago? I had missed it, but just got an email this morning from Scottrade as I own a few shares.

The following link has the info regarding the series of preferreds and the offer amounts.

I own shares of BML-Q (8.625s, Ser 8) which for some reason are priority level 9 of this offer. It seems to me, that at that interest rate they would be more apt to retire them, unless they are worried that inflation will drive the floating rate up significantly.

I bought the shares at 11.47 on 1/21/09 (CY=18.80%). And I can trade them in for $21(CY=10.27%) worth of common on 6/22/09. I am conflicted. I think I will keep it for the 10.27% yield, but it is tough to give up booking an 83% gain in 5 months.

2 Reasons why I am leaning towards not exchanging this...

1. I would be more inclined a little closer to par - say $23. I think $21 is too low for a preferred with such a high coupon.

2. The exchange is being offered in shares of common. I am nervous that I would not be able to liquidate the common quickly enough to capture the gains. I am uncertain how the dilution will affect the share price. Conversely, there is the possibility that the news of acceptance of this offer by a large enough number of preferred holders could send the common skyrocketing with giddiness after the conversion price is set and it could be a homerun..... Maybe I tender half and keep half.

What to do what to do.

Is anyone else holding any of the Bank of America preferreds in question?

There also appears to be a slight arbitrage opportunity as BML-Q is trading at 19.12 and will be exchanged at 21 if it goes through. I do not know if similar opportunity exists in the other issues higher up the priority list. It is unclear to me at this point how far BAC might get down the priority list to accomplish their goal/before they run out of common stock.

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No. of Recommendations: 0
We don't own any of the BAC preferred stock, but we do own a couple rather large bonds. We have received no e-mail. We are on the road so I don't know if we have received a letter.

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No. of Recommendations: 5
Karen Finerman of Fast Money on CNBC shorted BAC common stock and bought BAC preferreds. Seems like that trade is working out for her. If you think BAC is apt to hit another pothole in the near future, it might be worth booking the 83% gain now and buying back later if you are particularly interested in holding BAC instruments. If you think it's clear sailing for BAC into the future, then consider holding.
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Offer is only for preferreds. They need to increase their amount of tier 1 capital according to the press release.

In for 50 more today at $18.70.

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Please help me out:

I'm new to these exchanges. I bought BAC preferred J at $5.50, with a huge corresponding interest rate at that price. The stock has since more than tripled. I am still getting a great interest rate of over 10%. Stock price today is over 18, and the exchange offer is for $18.75.

What possible advantage is there for me to exchange for commons? Seems like I have a great deal. What are the risks of holding the preferred? If they go down, the interest rate goes up. If they go up, they go up.

If I want to book the profit, what is the difference between just selling the preferreds vs. exchanging, then selling the commons? Wouldn't the commons be diluted by the exchange and thus begin to lose value?

I would appreciate someone's wiser experience here.

Thank you.
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No. of Recommendations: 3
Each of the issues being offered the exchange is a slightly different situation, in my case for Q series, there is a significant premium over the market price.

In your case, the PF mature in 2012.

You need to decide if you think BAC will not default on these issues.

You need to decide if the risk that BAC will default is significant and if it is a good option to take $.75 on the dollar today or wait for your full $1.00 in 2012 and collect the interest along the way.

You need to think about the fact that the $18.75 is not in case but is in BAC common and that the BAC common could drastically decrease in value due to dilution, drastically increase in value due to giddyness over BAC's reduced debt load and the possibility of improved operating expense going forward, and of course the possibility that BAC will not change drastically one way or the other.

Prior to the offer, I owned 40 shares of BML-Q. I plan on holding that and continuing to receive dividends. I also picked up another 50 shares as a play on the tender offer and will either tender or sell those in the short term.

It isn't an easy decision, but If you cannot come to terms with a real reason to let go of you shares, I would forget you ever got the tender. If you bought these PFs with the plan to hold them to maturity and receive an ample dividend along the way, there is nothing material in the tender to change that.... unless you think that for one of the reasons listed above the situation has changed and you prefer to cash out.

There is no easy answer, you just need to think it through and be comfortable with your decision. The decision to not tender is very similar to the decision you made to buy these in the first place, unless something material has changed and only you can decide that.

Best of luck.

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Thank you so much. You are awesome. You are what makes the Fool such a great site. You confirmed almost all my concerns, and hopefully confirmed that I wasn't missing some GIANT "thing" that an amateur investor wouldn't know.

My original intent for that purchase was to take advantage of the temporary ridiculously high dividend, but only because on the morning I bought, Geitner and Obama had indicated that they were not going to let the bigger banks fail. I gambled that Bank of America was included, and especially because they (and Wells) had been encouraged and supported by the governement to pick up losers like Wachovia and Countrywide. It felt like an informal partnership. Luckily I guessed right, and the shares went up as a bonus to the dividend.

I don't feel the risk of default. I feel much more risk with the common, especially with consumer sentiment not yet satisfied with "reform" legislation. Still some upside left on the preferred, plus the nice dividend. I think I will hold for the moment. Just a small portion of my portfolio.. though up to 6% with the increased value now.

I do however really like your idea to buy some for a sample play.


Thanks again.

John Markarian
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The final results of the exchange offer has been posted.

Didn't quite make it down to the Q series, but quite a few shares were tendered and exchanged.

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