Bank of America Corp. (BAC:US), the second- largest U.S. bank, said it will redeem $3.9 billion of trust- preferred securities as the firm reduces costly debt.
Bank of America will use “excess liquidity” to repurchase the instruments, which paid 6.25 percent to 10.5 percent interest, the Charlotte, North Carolina-based company said today in a statement. The lender said it has regulatory approvals for the redemptions, which take effect July 25.
Chief Executive Officer Brian T. Moynihan, 52, has been reducing long-term debt since last year to cut interest costs while raising capital to meet regulatory demands. Trust- preferred securities won’t count as Tier 1 common equity under coming rules set by the Basel Committee on Banking Supervision.
“This action reflects the work we’ve done to build record levels of capital and liquidity,” Chief Financial Officer Bruce Thompson said in the statement. “We continue to look to optimize the balance sheet.”
Bank of America retired $4.2 billion of debt for cash and exchanged $730 million of trust-preferred securities for cash and shares in the first quarter, the firm said in April. Those actions helped improve Tier 1 common equity by $1.7 billion in the quarter.
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