Bank of America Corporation

Morgan Stanley

Jonathan M Ross

Serkan Savasoglu

Charles J Nelsen

Rizvan Dhalla

Scott Greenberg

Craig W McCracken

Jeffer M Choudhry

A method of creating, selling, converting, and redeeming exchangeable instruments that may result in favorable tax and/or accounting treatment for a company that is a parent to an issuing subsidiary. The parent company transfers a conversion option to a wholly owned subsidiary. The subsidiary attaches the parent's conversion option to its own nonconvertible debt instrument, creating an exchangeable instrument to be issued to investors. Payment for the exchangeable instrument is remitted to the parent for the value of the conversion option and to the subsidiary with respect to the nonconvertible debt instrument. The split obligations of parent and subsidiary may result in a relatively high tax interest expense and relatively low accounting interest expense. Use of a net share settlement feature may result in reduced dilution of the parent's equity.

Exchangeable equity-linked security

The present invention is directed to a method comprising the step of issuing one or more convertible hybrid securities by an issuer to one or more investors. The issued hybrid securities may have (1) a legally enforceable covenant (e.g., an RCC) and (2) a mandatory deferral which may require the issuer to withhold certain payments upon an occurrence of specified events. The hybrid securities may be convertible by the investor or callable by the issuer. Upon conversion by an investor, the issuer may make a payment to the investor in an amount of preferred stock up to the par value of the hybrid securities and an amount of common stock for the amount paid over the par value of the hybrid securities. The preferred stock may comprise a dividend rate. The dividend rate may be (1-statutory tax rate) times a coupon for the hybrid securities. The issuer may settle with the investor, or all of the investors, upon the issuer calling the hybrid securities.

Convertible hybrid securities

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Eastchester, NY, United States of America

Jonathan M Ross