BofA gets more bailout aid from feds - Kansas City Business Journal:

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BofA, based in Charlotte, N.C., considered backing out of the deal or renegotiatintg its terms when losses at Merrilkl Lynch worsened significantly in BofA Chief Executive Kenneth Lewisx said federal regulators feared that canceling or delaying the deal woulr severely harmthe nation’s financial The package of direct investment and loss protection was announcedf soon after midnight The , the and the participatesd in negotiations. The deal includes a requiremen that BofA submitits executive-compensation plan to the governmentg for approval. The company (NYSE: BAC) decidexd to go ahead with its Jan. 1 purchase of Merrill after the new investmentt and loan guarantees werein place.
BofA ranks as the depositt market-share leader in Kansas City. The bank had an 11.9 percenf share of deposits in the Kansae City area as ofJune 30, the most recent figures During a conference call Friday morning, Lewiss insisted that the bank had not missed any problemsd at Merrill in doing its due diligence before making the deal last year. He said the capita and credit markets nose-dived late in the fourtuh quarter. That produced much deeper losses at Merrill estimatedat $15.5 billion for the quarter than had been anticipated. “I a nutshell, it was much highetr deterioration in assets than we had identified as hetold analysts.
“It was more losses than anyond wouldhave forecast, I think.” The additionalp $20 billion makes BofA one of the largest recipients of federalk cash from the the $700 billiob Troubled Assets Relief Program adopted last year by BofA got $15 billion from that program in October. When it boughtf Merrill, it got the $10 billion that was slatedd to go to theinvestment bank. With the latesrt injection, the bank will have received $45 Inc. (NYSE:C) is the other largestf recipient. The government will get preferred stoci with an 8 percent dividend for its latest investmengtin BofA.
In addition to that investment, the government will guaranteer BofA against losses on a poolof $118 billionj in loans, securities backed by residential and commerciao real estate loans and other BofA will be responsible for the firsyt $10 billion in losses. After the government will assume 90 percent of anyadditionalp losses. In return for the loss the bank will give the government anadditional $4 billion in preferred stock. It also will grant the governmen t warrants that can be redeemed for additionalppreferred stock. Lewis defendex the Merrill deal as a good business move for BofA despitwe thecurrent problems.
The deal is expected to hurt BofA’d bottom line at leasgt through 2011. And the speedd and the strength of any turnaroundc there depends on the speed and strength of an economic recovery from the current But Lewis contended that the purchase of Merrillmakes long-term strategicv sense. It will make BofA a significantlt more profitable company when the economy recovers and capitapl markets returnto normal. And he said it makew good business sense for BofA to be involve d in efforts to help that Buying Merrill, even in the new and more difficult puts BofA in the forefront of cooperating with the government on recovery efforts, Lewis said.
The public, he said, will remembeer that BofA was there for the nation when it needed and that will create business opportunitiesin recovery.