Bank of America Terminates Asset Guarantee Term Sheet

Published: 22-Sep-2009

Intends to reduce its reliance on government support and return to normal market funding

Bank of America has reached an agreement with the US Government to terminate its term sheet with respect to the guarantee of up to $118 billion in assets by the US Government. The term sheet was executed in connection with Bank of America's acquisition of Merrill Lynch in January 2009.

As per the terms of the agreement, Bank of America will pay $425 million to the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation. The bank has also announced that it had received FDIC approval to exit the debt guarantee program under the FDIC's Temporary Liquidity Guarantee Program (TLGP).

The decisions to terminate the asset guarantee term sheet and exit the debt guarantee program are the latest in a series of steps taken by Bank of America to reduce its reliance on government support and return to normal market funding.

Other steps include: Increasing Tier 1 common capital by $40 billion through several steps, including a $15.5 billion common stock offering, $10.9 billion in preferred stock exchanges and asset sales; Issuing $10 billion in nongovernment-backed debt in the public markets; Reducing borrowings under the government's Term Auction Facility (TAF); Eliminating borrowings from the Federal Reserve's Term Securities Lending Facility (TSLF) and Primary Dealer Credit Facility (PDCF); Maintaining no governmental common stock ownership in the company, including converting no TARP preferred shares to common stock.

Kenneth Lewis, chief executive officer and president, said: "We are pleased to resolve this matter and move forward. We are a stronger company than we were even a few months ago, and while we continue to face challenges from rising credit costs, we believe we have all the pieces in place to emerge from this current economic crisis as one of the leading financial services firms in the world."

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