Bank of America has reached an agreement to sell 50,000 shares to Berkshire Hathaway in a private offering.
The shares were Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share.
The preferred stock has a dividend of 6% per annum, payable in equal quarterly installments, and is redeemable by the company at any time at a 5% premium.
Together with this agreement, Berkshire Hathaway will also receive warrants to purchase 700,000,000 shares of BofA common stock at an exercise price of $7.142857 per share.
The warrants may be exercised in whole or in part at any time, and from time to time, during the 10-year period following the closing date of the transaction. The aggregate purchase price to be received by BofA for the preferred stock and warrants is $5 billion in cash.
“We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value,” said BofA Chief Executive Officer Brian Moynihan. “I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett is a strong endorsement in our vision and our strategy.”
Buffett said he was impressed with the profit-generating abilities of the BofA franchise, and believed the bank was acting aggressively to put their challenges behind them.