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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