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URL:  https://boards.fool.com/followup-buffet-to-invest-5b-in-bac-29647456.aspx

Subject:  Followup: BUFFET To Invest $5B in BAC Date:  11/3/2011  6:10 PM
Author:  joelcorley Number:  33416 of 37043

Fools,

I made an assertion in this thread http://boards.fool.com/ytm-you-wrote-interesting-move-indeed... that Buffet effectively paid only $2.34B for preferred stock with a par value of $5B.

According to BAC's recent 10Q, On September 1, 2011, the Corporation closed the sale to Berkshire of 50,000 shares of the Series T Preferred Stock and the Warrant for an aggregate purchase price of $5.0 billion in cash. Of the $5.0 billion in cash proceeds, $2.9 billion was allocated to preferred stock and $2.1 billion to the Warrant on a relative fair value basis. The discount on the Series T Preferred Stock is not subject to accretion. The portion of the proceeds allocated to the Warrant was recorded as additional paid-in capital.

I stand corrected. Buffet received $5B in preferred stock for $2.9B. With a 6% coupon, his effective yield is only 10.34% according to BAC's math... :-)

Of course the preferreds can be redeemed at face value when exercising the warrants as well, so the yield to maturity is actually going to be much higher than 10.34%.

Way to go Buffet...

- Joel
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