B of A Mulls ‘Bad Bank’ With $4 Billion in Loans After Merger
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BankAmerica Corp. is considering as part of its merger with Security Pacific Corp. forming a subsidiary with $4 billion in problem loans and various investment securities that would be spun off to shareholders or sold in a stock offering.
The San Francisco banking firm, which disclosed the plan in a Securities and Exchange filing late Thursday, has previously said it is considering forming a bad bank to dispose of problem assets but had not previously identified a specific amount.
In the filing, BankAmerica said it will take a $250-million restructuring charge when the merger closes for such costs as employee severence pay, closing branches and combining systems. BankAmerica also expects to allocate $900 million to absorb the operations of its Los Angeles rival.
BankAmerica said shareholders are scheduled to vote Dec. 19 on the merger, a stock swap valued at $4.7 billion. BankAmerica said it plans to issue 112.7 million common shares in the merger. The bank has said it hopes to complete the deal by the end of February.
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