By David Mildenberg and Bryan Keogh
Jan. 23 (Bloomberg) -- Bank of America Corp., the nation's second-largest bank, plans to raise $6 billion by selling preferred shares.
The offering will be split between preferred shares and convertible preferred shares, the Charlotte, North Carolina- based company said today in a statement. Proceeds will be used for general corporate purposes, the bank said.
Bank of America said yesterday its fourth-quarter earnings dropped 95 percent after $5.28 billion of mortgage-related writedowns and higher provisions for future loan losses. Chief Executive Officer Kenneth Lewis said he wants to rebuild the bank's Tier 1 capital ratio, which measures its ability to cover losses, to 8 percent of assets. The ratio was 6.87 percent as of Dec. 31, compared with 8.64 percent at the end of 2006.
The convertibles may pay a dividend of 7.25 percent to 7.75 percent and carry a conversion premium of 20 percent to 25 percent, according to a person familiar with the offering who declined to be identified because terms aren't set.
The sale of the convertibles, which aren't callable for five years, will take place as soon as tomorrow, the person said.
Bank of America gained $3.18, or 8.5 percent, to $40.57 at 4:16 p.m. in New York Stock Exchange composite trading. The stock has declined about 24 percent in the past year.