Bank of America to clear government debt

by Gill Montia

Story link: Bank of America to clear government debt

Bank of America (BoA) has set out plans to repay its $45 billion loan from the US Government, thereby freeing itself from constraints on pay and bonuses, and the cost of serving the debt.

The bank proposes to achieve its objective by using $26.2 billion in available cash and raising $18.8 billion through the sale of securities.

According to reports, the move could make it easier for the group to appoint a new chief executive to replace Kenneth Lewis, who retires at the end of the year.

BoA’s credit crisis difficulties were exacerbated by its acquisition of Merrill Lynch in autumn of 2008, when Merrill was close to collapse, and the group posted net losses totalling $1 billion during the third quarter of 2009, compared with net profits of $1.2 billion a year earlier.

Goldman Sachs was the first of the Wall Street banks to clear its credit crisis debt ($10 billion) with the US Treasury.

This it achieved in April, with a $5 billion issue of new shares.