By Bryan Keogh and David Mildenberg
Jan. 24 (Bloomberg) -- Bank of America Corp., the second- biggest U.S. bank, raised $12 billion in its largest offering of preferred shares, attracting investors with some of the highest yields in 15 years.
Bank of America sold $6 billion of perpetual preferred shares at a yield of 8 percent, according to data compiled by Bloomberg. The bank also sold $6 billion of convertible preferred stock. The overall sale's size, which was doubled, received ``strong investor interest,'' according to a company statement.
The bank, based in Charlotte, North Carolina, is rebuilding its capital after spending $24.3 billion to acquire U.S. Trust Corp. and LaSalle Bank last year and agreeing this month to buy Countrywide Financial Corp. for $4 billion. Bank of America joins Citigroup Inc. and other banks shoring up capital after reporting $133 billion in asset writedowns and credit losses tied to last year's collapse of the U.S. subprime mortgage market.
``They definitely need the capital,'' said Chris Hagedorn, a portfolio manager at Fifth Third Asset Management, which has $22 billion under management.
The convertible shares, which yield 7.25 percent, carry a conversion price of $50 per common share, according to the statement.
Bank of America fell 67 cents, or 1.7 percent, to $39.90 in composite trading on the New York Stock Exchange.
Bank of America on Jan. 22 said 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 is ``expected to approach management's target'' of 8 percent as a result of the offering, according to the statement.
The ratio was 6.87 percent as of Dec. 31, compared with 8.64 percent at the end of 2006. With Bank of America's $1.7 trillion in assets, increasing Tier 1 capital by 1 percentage point equals $17 billion.
Bank of America in December 1992 sold $237.5 million of perpetual preferred shares with a dividend of 8.5 percent, according to data compiled by Bloomberg.
New York-based Citigroup, the biggest U.S. bank, last week sold $18.65 billion of debt, including $3.25 billion of perpetual preferred stock at a yield of 8.125 percent.