424B2 1 d920310d424b2.htm 424B2 424B2
Table of Contents

Filed pursuant to Rule 424(b)(2)
Registration No. 333-224523

 

The information in this pricing supplement is not complete and may be changed. We may not deliver these securities until a final pricing supplement is delivered. This pricing supplement and the attached base rates supplement, prospectus supplement and prospectus do not constitute an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, Preliminary Pricing Supplement dated May 14, 2020

 

LOGO  

Pricing Supplement No.        

(To Prospectus dated June 29, 2018, Prospectus

Supplement dated June 29, 2018 and Base

Rates Supplement No. 1 dated April 15, 2020)

May    , 2020

Medium-Term Notes, Series N

$             % Fixed/Floating Rate Senior Notes, due                  20    

This pricing supplement describes a series of our senior notes that will be issued under our Medium-Term Note Program, Series N.

The notes mature on                      , 20    . We will pay interest on the notes (a) from, and including, May     , 2020 to, but excluding,                      , 20    , at a fixed rate of     % per annum, payable semi-annually, and (b) from, and including,                      , 20     to, but excluding, the maturity date, at a floating rate per annum equal to compounded SOFR (determined with respect to each quarterly interest period in accordance with the payment delay convention), plus     %, payable quarterly.

We will have the option to redeem the notes prior to the stated maturity as described in this pricing supplement under the heading “Specific Terms of the Notes—Optional Redemption.”

As described under “Use of Proceeds” in this pricing supplement, we will use the net proceeds of the sale of the notes to fund Eligible Social Investments.

The notes are unsecured and rank equally with all of our other unsecured and unsubordinated indebtedness outstanding from time to time. We do not intend to list the notes on any securities exchange.

SOFR is a relatively new rate. The composition and characteristics of SOFR are not the same as those of USD LIBOR, and SOFR is not expected to be a comparable substitute, successor or replacement for USD LIBOR. See the attached Base Rates Supplement No. 1 dated April 15, 2020 (the “base rates supplement”) for additional information regarding SOFR as well as risks relating to SOFR.

Investing in the notes involves risks. For an explanation of some of these risks, see “Additional Risk Factors” beginning on page RS-4 of the attached base rates supplement, “Risk Factors” beginning on page S-5 of the attached prospectus supplement and “Risk Factors” beginning on page 9 of the attached prospectus.

None of the Securities and Exchange Commission, any state securities commission, or any other regulatory body has approved or disapproved of the notes or passed upon the adequacy or accuracy of this pricing supplement, the attached base rates supplement, the attached prospectus supplement, or the attached prospectus. Any representation to the contrary is a criminal offense.

 

         Per Note             Total      

Public Offering Price

            $            

Selling Agents’ Commission

            $            
  

 

 

   

 

 

 

Proceeds (before expenses)

            $            

We expect to deliver the notes in book-entry only form through the facilities of The Depository Trust Company on May     , 2020.

 

 

Sole Book-Runner

BofA Securities


Table of Contents

SPECIFIC TERMS OF THE NOTES

The description of certain specific terms of the notes set forth below supplements, and should be read together with, the description of our Medium-Term Notes, Series N included in the attached prospectus supplement dated June 29, 2018 and the general description of our debt securities included in “Description of Debt Securities” in the attached prospectus also dated June 29, 2018, as such descriptions are amended and supplemented by the attached base rates supplement. The base rates supplement, among other things, (i) describes certain terms and provisions of floating rate notes, referred to therein as compounded SOFR notes, including the notes, for which the base rate is compounded SOFR, and (ii) supersedes and replaces, as specified therein, descriptions of certain terms and provisions in the attached prospectus supplement and the attached prospectus relating to the determination of the rate of interest and other related terms and provisions that would apply to the notes if not so superseded and replaced. For more information with respect to the determination of compounded SOFR and the payment delay convention, see “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Compounded SOFR Notes” in the base rates supplement.

If there is any inconsistency or conflict between the information in this pricing supplement and in the attached base rates supplement, prospectus supplement or prospectus, the information in this pricing supplement will govern and control. Capitalized or other defined terms used, but not defined, in this pricing supplement have the same meanings as are given to them in the attached base rates supplement, prospectus supplement or prospectus, as applicable.

 

•  Title of the Series:

       % Fixed/Floating Rate Senior Notes, due                  20    

•  Type of Notes:

   Compounded SOFR notes

•  Aggregate Principal Amount Initially Being Issued:

   $        

•  Issue Date:

   May     , 2020

•  CUSIP No.:

  

•  ISIN:

  

•  Maturity Date:

                        , 20

•  Minimum Denominations:

   $2,000 and multiples of $1,000 in excess of $2,000

•  Ranking:

   Senior

•  Fixed Rate Coupon:

       % payable semi-annually in arrears from, and including, the Issue Date to, but excluding,                     , 20    (the “Fixed Rate Period”).

•  Floating Rate Coupon:

   Base Rate plus the Spread, payable quarterly in arrears from, and including,                      , 20     to, but excluding, the Maturity Date (the “Floating Rate Period”).

•  Base Rate:

  

Compounded SOFR, which is a compounded average of Daily SOFR (the Secured Overnight Financing Rate) as determined for each quarterly Interest Period during the Floating Rate Period in accordance with the specific formula and other applicable terms and provisions set forth in the attached base rates supplement.

 

PS-2


Table of Contents
  

 

For more information on the determination of the Base Rate, see “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Compounded SOFR Notes” in the base rates supplement.

•  Spread:

                   basis points

•  Compounded SOFR Convention:

   Payment delay convention

•  Interest Periods:

  

During the Fixed Rate Period, each semi-annual period from, and including, an Interest Payment Date (or, in the case of the first Interest Period, the Issue Date) to, but excluding, the next Interest Payment Date.

 

During the Floating Rate Period, each quarterly period from, and including, an Interest Period Demarcation Date (or, in the case of the first Interest Period during the Floating Rate Period,                      , 20    ) to, but excluding, the next Interest Period Demarcation Date (or, in the case of the final Interest Period, the Maturity Date or, if the notes are redeemed, the redemption date).

•  Interest Period Demarcation Dates during the Floating Rate Period:

   The              of each February, May, August, and November, commencing August     , 20     and ending on the Maturity Date or, if we elect to redeem the notes prior to the Maturity Date, ending on the redemption date.

•  Interest Payment Dates:

  

During the Fixed Rate Period, May      and November      of each year, beginning November     , 2020 and ending                      , 20    .

 

During the Floating Rate Period, the second Business Day following each Interest Period Demarcation Date; provided that the Interest Payment Date with respect to the final Interest Period will be the Maturity Date or, if the Notes are redeemed, the redemption date.

•  Rate Cut-Off Date:

  

The second U.S. government securities business day prior to the Maturity Date or redemption date, as applicable.

 

For purposes of calculating compounded SOFR with respect to the final Interest Period, Daily SOFR for each U.S. government securities business day in the period from, and including, the Rate Cut-Off Date to, but excluding, the Maturity Date or redemption date, as applicable, shall be Daily SOFR in respect of such Rate Cut-Off Date.

 

PS-3


Table of Contents

•  Day Count Convention:

   30/360 during the Fixed Rate Period; Actual/360 during the Floating Rate Period

•  Business Days:

   During the Fixed Rate Period, New York/Charlotte; during the Floating Rate Period, New York/Charlotte and U.S. government securities business day

•  Business Day Convention:

   During the Fixed Rate Period, following unadjusted business day convention; during the Floating Rate Period, modified following business day convention (adjusted).

•  Optional Redemption:

   We will have the option to redeem the notes, in whole at any time or in part from time to time, on or after November     , 2020 (or, if additional notes are issued after May     , 2020, beginning six months after the issue date of such additional notes), and prior to                      , 20    , at the applicable “make-whole” redemption price for the notes described below under the heading “—Optional Redemption.” We also will have the option to redeem the notes: (a) in whole, but not in part, on                      , 20    , or (b) in whole at any time or in part from time to time, on or after                      , 20     and prior to the Maturity Date, in each case at 100% of the principal amount of the notes being redeemed. If we redeem any notes, we also will pay accrued and unpaid interest, if any, thereon, to, but excluding, the redemption date.

•  Record Dates for Interest Payments:

   For book-entry only notes, one business day prior to the applicable Interest Payment Date. If the notes are not held in book-entry only form, the record dates will be the fifteenth calendar day preceding the applicable Interest Payment Date as originally scheduled to occur.

•  Repayment at Option of Holder:

   None

•  Listing:

   None

•  Calculation Agent:

   For purposes of calculating the rate of interest on the notes during the Floating Rate Period, we have entered into an agreement with The Bank of New York Mellon Trust Company, N.A. to act as calculation agent. We may remove the calculation agent at any time, and we may appoint a replacement calculation agent, which may be an affiliate of ours, without your consent and without notifying you of the change.

•  Further Issuances:

   We have the ability to “reopen,” or increase after the Issue Date, the aggregate principal amount of the notes initially being issued without notice to the holders of existing notes by selling additional notes having the same terms, provided that such additional

 

PS-4


Table of Contents
   notes shall be fungible for U.S. federal income tax purposes. However, any new notes of this kind may have a different offering price and may begin to bear interest on a different date.

Optional Redemption

We may redeem the notes at our option: (i) in whole, but not in part, on the Interest Payment Date on                      , 20     , and (ii) in whole at any time or in part from time to time, on or after                      , 20     and prior to the Maturity Date for the notes, in each case upon at least         business days’ but not more than         calendar days’ prior written notice to holders of the notes being redeemed, and in each case at a redemption price equal to 100% of the principal amount of such notes, plus accrued and unpaid interest, if any, thereon, to, but excluding, the applicable redemption date.

In addition, we may redeem the notes, at our option, in whole at any time or in part from time to time, on or after November     , 20     (or, if additional notes are issued after May     , 2020, then, beginning six months after the issue date of such additional notes), and prior to                      , 20    , upon at least         business days’ but not more than         calendar days’ prior written notice to the holders of the notes being redeemed, at a “make-whole” redemption price equal to the greater of:

(i) 100% of the principal amount of the notes being redeemed; or

(ii) as determined by the quotation agent described below, the sum of the present values of (a) the principal amount of the notes to be redeemed, as if paid on                      , 20    , and (b) the scheduled payments of interest on the notes to be redeemed, that would have been payable from the redemption date to                      , 20    , in each case discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus                  basis points, minus interest (on the notes to be redeemed) accrued to, but excluding, the redemption date,

plus, in either case of (i) or (ii) above, accrued and unpaid interest, if any, on the principal amount of the notes being redeemed to, but excluding, the applicable redemption date.

Notwithstanding the foregoing, any interest on the notes being redeemed that is due and payable on an Interest Payment Date falling on or prior to a redemption date for such notes will be payable on such Interest Payment Date to holders of such notes as of the close of business on the relevant record date according to the terms of such notes and the 2018 Senior Indenture.

treasury rate” means, with respect to the applicable redemption date, the rate per annum equal to: (1) the yield, under the heading that represents the average for the week immediately prior to the applicable calculation date, appearing in the most recently published statistical release appearing on the website of the Board of Governors of the Federal Reserve System or in another recognized electronic source, in each case, as determined by the quotation agent in its sole discretion, and that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity, for the maturity corresponding to the applicable comparable treasury issue; provided that, if no such maturity is within three months before or after                      , 20    , yields for the two published maturities most closely corresponding to the applicable comparable treasury issue will be determined and the applicable treasury rate will be interpolated or extrapolated from those yields on a straight-line basis, rounding to the nearest month; or (2) if such release (or any successor release) is not published during the week immediately prior to the applicable calculation date or does not contain such yields, the semi-annual equivalent yield to maturity or interpolated maturity (on a day-count basis) of the applicable comparable treasury issue, calculated using a price for the applicable comparable treasury issue (expressed as a percentage of its principal amount) equal to the related comparable treasury price for such redemption date.

The applicable treasury rate will be calculated by the quotation agent on the third business day preceding the applicable redemption date of the notes being redeemed.

 

PS-5


Table of Contents

In determining the treasury rate, the below terms will have the following meaning:

comparable treasury issue” means, with respect to the applicable redemption date for notes being redeemed, the U.S. Treasury security or securities selected by the quotation agent as having an actual or interpolated (on a day-count basis) maturity comparable to the remaining term of such notes, as if such notes matured on                      , 20     that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such notes as if such notes matured on                      , 20    .

comparable treasury price” means, with respect to any applicable redemption date, (1) the average of the reference treasury dealer quotations for such redemption date, after excluding the highest and lowest reference treasury dealer quotations, provided that the quotation agent obtains five reference treasury dealer quotations, or (2) if the quotation agent obtains fewer than five such reference treasury dealer quotations, the average of all such quotations.

quotation agent” means BofA Securities, Inc. or its successor, or, if that firm is unwilling or unable to select the comparable treasury issue, an investment bank of national standing appointed by us.

reference treasury dealer” means (1) BofA Securities, Inc., or its successor, unless that firm ceases to be a primary U.S. government securities dealer in New York City (referred to in this pricing supplement as a “primary treasury dealer”), in which case we will substitute another primary treasury dealer, and (2) four other primary treasury dealers that we may select.

reference treasury dealer quotations” means, with respect to each reference treasury dealer and any redemption date, the average, as determined by the quotation agent, of the bid and asked prices for the applicable comparable treasury issue (expressed in each case as a percentage of its principal amount) quoted in writing to the quotation agent by such reference treasury dealer at 3:30 p.m., New York City time, on the third business day preceding such redemption date.

Unless we default on payment of the applicable redemption price, interest will cease to accrue on the notes or portions thereof called for redemption on the applicable redemption date. If fewer than all of the notes are to be redeemed, for so long as such notes are in book-entry only form, such notes to be redeemed will be selected in accordance with the applicable procedures of The Depository Trust Company.

Because BofA Securities, Inc. is, and any successor to BofA Securities, Inc. will be, our affiliate, the economic interests of BofA Securities, Inc. or its successor may be adverse to your interests as a holder of the notes subject to our redemption, including with respect to certain determinations and judgments it must make as quotation agent in the event that we redeem the notes before their maturity pursuant to the “make-whole” optional redemption described above.

 

PS-6


Table of Contents

USE OF PROCEEDS

When used in this section, “Bank of America,” “we,” “us” and “our” refers to Bank of America Corporation and its subsidiaries, as a consolidated enterprise.

Eligible Social Investments

An amount equal to the net proceeds of the sale of the notes will be used to finance or refinance, in whole or in part, existing and new Eligible Social Investments. The following will be deemed an “Eligible Social Investment”:

Amounts funded under new and existing loans and lines of credit to our Global Commercial Banking clients1 (excluding those funded as a result of applications received under the Paycheck Protection Program created pursuant to the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act) whom we reasonably believe to be or to have been involved in activities in response to the COVID-19 pandemic, and who are in one of the following subsectors of the healthcare industry: (i) Not for Profit Hospitals; (ii) Skilled Nursing Facilities; (iii) Healthcare Equipment; or (iv) Healthcare Supplies.

Eligible Social Investments include new and existing investments with disbursements made between March 11, 2020, which is the date the World Health Organization declared COVID-19 a global pandemic, through the maturity or redemption of the notes.

The target population for the Eligible Social Investments described above includes populations affected by the COVID-19 pandemic which may include the general public given the extensive nature of the COVID-19 pandemic.

Process for Evaluation and Selection

The Eligible Social Investments are identified and selected through a process that involves participants from various functional areas, including our Global Environmental, Social, and Governance group (“ESG Group”), our Global Commercial Banking group, and our Corporate Treasury group. The ESG Group evaluates and determines project eligibility according to the criteria indicated above. The list of projects compiled by the ESG Group is reviewed and finalized by appropriate Bank of America officers.

 

1 

Bank of America’s Global Commercial Banking (GCB) clients generally include middle-market companies, commercial real estate firms and not-for-profit companies with annual revenues of $50 million to more than $2 billion.

 

PS-7


Table of Contents

When determining whether amounts funded under new and existing loans and lines of credit to our Global Commercial Banking clients are Eligible Social Investments, we will consider the following activity to be in response to the COVID-19 pandemic:

 

Industry Subsector    Activity
Not for Profit Hospitals    Treatment of COVID-19 patients
Skilled Nursing Facilities
Healthcare Equipment   

Manufacturing of equipment and/or supplies2 which can be used in the following activities related to the COVID-19 pandemic:

 

•  Testing for current infection or evidence of prior infection (including antibodies),

 

•  Diagnosis including disease progression and evaluation of symptoms,

 

•  Treatment of infection and related symptoms, or

 

•  Prevention, including personal protective equipment and vaccines.

Healthcare Supplies
 
 
 
 
 
 
 

Management of Proceeds

An amount equal to the net proceeds of the notes will be allocated by us to the financing or refinancing, in whole or in part, of existing and future Eligible Social Investments. So long as the notes remain outstanding, our internal records will show, at any time, the portion of an amount equal to the net proceeds from the issuance of the notes as allocated to Eligible Social Investments.

Pending the allocation of an amount equal to the net proceeds of the notes to finance or refinance Eligible Social Investments, an amount equal to the net proceeds will be invested in overnight and/or other short-term financial instruments.

Payment of principal of and interest on the notes will be made from Bank of America Corporation’s general funds and will not be directly linked to the performance of any Eligible Social Investments.

If any amounts funded under new or existing loans and lines of credit that constitute Eligible Social Investments receiving allocations of net proceeds from this offering of the notes are prepaid during the term of the loan or repaid at maturity, we will reallocate an equivalent amount to other Eligible Social Investments on a best efforts basis.

Reporting

During the term of the notes we will provide and keep readily available, on a designated website, information as to amounts allocated to Eligible Social Investments in each healthcare industry subsector described above. Such information will also include amounts, if any, temporarily invested in cash, cash equivalents, overnight investments and/or other short-term financial instruments, and will be updated at least annually as long as the notes remain outstanding.

In addition, the first, and only the first, information report published after proceeds are fully allocated will include (i) assertions by Bank of America management that an amount equal to the net proceeds of the notes is

 

2 

Such equipment and/or supplies include but are not limited to the following: (i) laboratory testing equipment, (ii) supplies for testing for the COVID-19 virus or antibodies (such as swabs or reagents), (iii) vaccines, (iv) intravenous delivery systems, (v) products used to maintain a sterile environment for patient treatment, (vi) imaging equipment which can be used to diagnose pulmonary disease, (vii) hospital beds, (viii) face masks, and (ix) face shields.

 

PS-8


Table of Contents

allocated to Eligible Social Investments, and (ii) a report from an independent accountant in respect of the independent accountant’s examination of management’s assertion executed in accordance with attestation standards established by the American Institute of Certified Public Accountants.

When reasonable, the information published will also include case studies with additional information on highlighted investments, as well as estimated outcomes and impact indicators, which give a sense of the scope of response efforts. Potential impact indicators may include one or more of the following: the number of loans and borrowers to which we allocated a portion of an amount equal to net proceeds of the notes, by subsector; the number of employees at such borrowers; the activity in response to the COVID-19 pandemic in which the borrower is engaged; the number of COVID-19 patients treated; or the amount of equipment and/or supplies manufactured. However, we note that there is considerable uncertainty with respect to available data for such impact indicators given the nature of the Eligible Social Investments and rapidly evolving responses to the COVID-19 pandemic.

Further Information

The Social Bond Principles, June 2018 (the “2018 Social Bond Principles”) are voluntary process guidelines for the issuance of social bonds developed by a committee of issuers, investors and other participants in the social bond market, with the International Capital Market Association acting as Secretariat. The 2018 Social Bond Principles have four core components:

 

   

use of proceeds;

 

   

process for project evaluation and selection;

 

   

management of proceeds; and

 

   

reporting.

We believe that Bank of America’s internal investment criteria and the process described above are in alignment with the 2018 Social Bond Principles.

We also believe that the Eligible Social Investments to which an amount equal to the net proceeds of the notes will be allocated will support United Nations Sustainable Development Goal #3, Good Health and Well-Being.

 

PS-9


Table of Contents

SUPPLEMENTAL INFORMATION CONCERNING THE PLAN OF

DISTRIBUTION AND CONFLICTS OF INTEREST

On May     , 2020, we entered into an agreement with the selling agents identified below for the purchase and sale of the notes. We have agreed to sell to each of the selling agents, and each of the selling agents has agreed to purchase from us, the principal amount of the notes shown opposite its name in the table below at the public offering price set forth above.

 

Selling Agent

   Principal Amount of
Notes ($)
 

BofA Securities, Inc.

                       
  

 

 

 

Total

  
  

 

 

 

The selling agents may sell the notes to certain dealers at the public offering price, less a concession which will not exceed                 % of the principal amount of the notes, and the selling agents and those dealers may resell the notes to other dealers at a reallowance discount which will not exceed                 % of the principal amount of the notes.

After the initial offering of the notes, the concessions and reallowance discounts for the notes may change.

We estimate that the total offering expenses for the notes, excluding the selling agents’ commissions, will be approximately $                .

BofA Securities, Inc. is our wholly-owned subsidiary, and we will receive the net proceeds of the offering. For information regarding BofA Securities, Inc., please refer to our current report on Form 8-K filed with the Securities and Exchange Commission on May 13, 2019.

We expect that delivery of the notes will be made to investors on or about May     , 2020, which is the     business day following the date of this pricing supplement (such settlement being referred to as “T+    ”). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to two business days before delivery will be required, by virtue of the fact that the notes initially settle in T+    , to specify an alternate settlement cycle at the time of the trade to prevent a failed settlement and should consult their own advisors in connection with that election.

Some of the selling agents and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

In addition, in the ordinary course of their business activities, the selling agents and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The selling agents or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such selling agents and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such short positions could adversely affect future trading prices of the notes offered hereby. The selling agents and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

To the extent any selling agent that is not a U.S. registered broker-dealer intends to effect any offers or sales of any notes in the United States, it will do so through one or more U.S. registered broker-dealers in accordance with the applicable U.S. securities laws and regulations.

 

PS-10


Table of Contents

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-224523

Base Rates Supplement No. 1

To Prospectus dated June 29, 2018

and Prospectus Supplement dated June 29, 2018

April 15, 2020

 

LOGO

Medium-Term Notes, Series N

USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes

This base rates supplement amends and supplements, as specified herein, the description of Bank of America Corporation Medium-Term Notes, Series N included in the accompanying prospectus supplement dated June 29, 2018, and the general description of our debt securities included in “Description of Debt Securities” in the accompanying prospectus dated June 29, 2018. In particular, this base rates supplement supersedes and replaces, as specified herein, descriptions of certain terms and provisions of our floating rate notes, for which the interest rate is determined by reference to one of the base rates specified below, relating to the determination of such base rates and the rates of interest for such floating rate notes, and other terms and provisions related thereto, in the accompanying prospectus supplement and prospectus. The terms and provisions set forth in this base rates supplement will apply to notes that we may offer from time to time using this base rates supplement, which we refer to herein as the “notes.”

The notes may be senior or subordinated. The notes will be floating-rate notes or fixed/floating rate notes, and the base rate for each series of the notes during any applicable floating-rate interest period will be USD LIBOR (as defined in this base rates supplement) for the index maturity specified in the applicable pricing supplement (such notes, “USD LIBOR notes”), term SOFR (as defined in this base rates supplement) for the index maturity specified in the applicable pricing supplement (such notes, “term SOFR notes”) or compounded SOFR (as defined in this base rates supplement) compounded daily in accordance with the convention and for the interest period or observation period specified in the applicable pricing supplement (such notes, “compounded SOFR notes”). This base rates supplement describes general terms and provisions relating to the determination of USD LIBOR, term SOFR or compounded SOFR, as applicable, interest rates, accrual of interest, interest payment dates, interest periods, the calculation of interest amounts and the timing of interest payments with respect to the notes. For each offering of notes, a pricing supplement will contain any additional terms of the offering and a specific description of terms and provisions of the notes being offered, including the applicable base rate, spread and/or spread multiplier, if any, issue price, maturity date, interest payment dates, redemption and/or repayment provisions, if any, and other relevant terms and provisions for such notes.

Investing in the notes involves risks. For a description of these risks with respect to the USD LIBOR notes, term SOFR notes and compounded SOFR notes, see “Additional Risk Factors” beginning on page RS-4 of this base rates supplement. Such description supersedes, as specified herein, certain risk factors relating to LIBOR and floating-rate notes set forth in the accompanying prospectus supplement and prospectus. See also “Risk Factors” beginning on page S-5 of the accompanying prospectus supplement and “Risk Factors” beginning on page 9 of the accompanying prospectus for a description of other risks relating to investing in the notes.

Certain capitalized or other defined terms that are used in this base rates supplement have the specific meanings set forth herein. A listing of the pages on which such terms are defined can be found under the Index of Certain Defined Terms at the end of this base rates supplement. Capitalized or other defined terms used, but not defined, in this base rates supplement have the same meanings as are given to them in the accompanying prospectus supplement or in the accompanying prospectus, as applicable.

 

 

Our notes are unsecured and are not savings accounts, deposits, or other obligations of a bank. Our notes are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and involve investment risks.

None of the Securities and Exchange Commission, any state securities commission, or any other regulatory body has approved or disapproved of these notes or passed upon the adequacy or accuracy of this base rates supplement, the accompanying prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

 

BofA Securities


Table of Contents

TABLE OF CONTENTS

 

 

 

RS-2


Table of Contents

ABOUT THIS BASE RATES SUPPLEMENT

From time to time, we intend to use this base rates supplement, the accompanying prospectus supplement and prospectus, and a related pricing supplement to offer the notes. You should read each of these documents before investing in the notes.

As specified herein, this base rates supplement describes terms and provisions of the notes that supersede and replace certain of the terms and provisions in (i) the description of our Medium-Term Notes, Series N contained in the accompanying prospectus supplement and (ii) the description of our debt securities that may be issued under the Indentures, including the notes, contained in the accompanying prospectus. In addition, this base rates supplement sets forth additional risk factors relating to the notes that supersede, as specified herein, certain risk factors relating to LIBOR and floating-rate notes set forth in the accompanying prospectus supplement and prospectus.

If there is any inconsistency or conflict between the information in this base rates supplement and in the accompanying prospectus supplement and/or the accompanying prospectus, the information in this base rates supplement will supersede any such inconsistent information in the accompanying prospectus supplement and/or the accompanying prospectus, and this base rates supplement will govern and control with respect to each series of the notes. If there is any inconsistency or conflict between the information in the applicable pricing supplement relating to an offering of the notes and in this base rates supplement, the accompanying prospectus supplement and/or the accompanying prospectus, the information in such pricing supplement will supersede any such inconsistent information in this base rates supplement, the accompanying prospectus supplement and/or the accompanying prospectus, and such pricing supplement will govern and control with respect to the relevant offering of the notes.

For each offering of notes, we will issue a pricing supplement that will contain additional terms of the offering and a specific description of terms and provisions of the notes being offered. Such pricing supplement also may add, update, or change information in this base rates supplement or the accompanying prospectus supplement and/or prospectus, including provisions describing the calculation of the amounts payable under the notes and the method of making payments under the terms of such notes. We will state in the applicable pricing supplement the applicable base rate, spread and/or spread multiplier, if any, issue price, the maturity date, interest payment dates, redemption and/or repayment provisions, if any, and other relevant terms and provisions for such notes at the time of issuance. Such pricing supplement also may include a discussion of any risk factors or other special additional considerations that apply to a particular offering of the notes. Each applicable pricing supplement can be quite detailed and always should be read carefully.

Unless we indicate otherwise or unless the context requires otherwise, all references in this base rates supplement to “the Corporation,” “Bank of America,” “we,” “us,” “our,” or similar references are to Bank of America Corporation excluding its consolidated subsidiaries.

 

RS-3


Table of Contents

ADDITIONAL RISK FACTORS

Your investment in the notes is subject to risks, including those discussed below and in the sections entitled “Risk Factors” beginning on page S-5 of the accompanying prospectus supplement and on page 9 of the accompanying prospectus and in the documents incorporated by reference in the accompanying prospectus.

This discussion of risks uses a number of capitalized and other terms that are defined elsewhere in this base rates supplement. A listing of the pages on which such terms are defined can be found under the Index of Certain Defined Terms at the end of this base rates supplement.

Risks Relating to Our Business

The following discussion of risks supplements, and should be read together with, the information regarding risks and uncertainties that may materially affect our business, results and financial condition described in the first paragraph under the headings ‘Risk Factors’ in the accompanying prospectus supplement and in the accompanying prospectus.

The COVID-19 pandemic has caused a significant global economic downturn which has adversely affected, and is expected to continue to adversely affect, the Corporation’s business and results of operations, and the future impacts of the COVID-19 pandemic on the global economy and the Corporation’s business, results of operations and financial condition remain uncertain.

The COVID-19 pandemic has resulted in authorities implementing numerous measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activity, including closures. These measures are, among other things, severely restricting global economic activity, which is disrupting global supply chains, lowering asset valuations, significantly increasing unemployment and underemployment levels, decreasing liquidity in markets for certain securities and causing significant volatility and disruptions in the financial markets. These measures have negatively impacted, and could continue to negatively impact, businesses, market participants, our counterparties and clients, and the global economy for a prolonged period of time. Should current economic conditions persist or continue to deteriorate, this macroeconomic environment could have a continued adverse effect on our business and operations, including but not limited to: decreased demand for our products and services; protracted periods of lower interest rates; lower asset management fees; lower sales and trading revenue due to decreased market liquidity resulting from heightened volatility; and increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for credit losses and net charge-offs. Additionally, our liquidity and regulatory capital could be adversely impacted by customers’ withdrawal of deposits, volatility and disruptions in the capital and credit markets, volatility in foreign exchange rates and continued customer draws on lines of credit. To the extent the COVID-19 pandemic continues to adversely affect the global economy, and/or adversely affects our business, results of operations or financial condition, it may also have the effect of increasing the likelihood and/or magnitude of other risks described in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, including those risks related to market, credit, geopolitical and business operations, or risks described in our other filings with the Securities and Exchange Commission.

In response to the economic and market conditions resulting from the COVID-19 pandemic, governments and regulatory authorities, including central banks, have acted to provide fiscal and

 

RS-4


Table of Contents

monetary stimulus to support the global economy. In the U.S., the Board of Governors of the Federal Reserve System (Federal Reserve) has, among other things: lowered the federal funds rate and the interest rate on the Federal Reserve’s discount window; implemented programs to promote liquidity in certain securities markets, including money markets, repurchase agreements, commercial paper, corporate debt securities, U.S. Treasury securities, and agency mortgage-backed securities; clarified supervisory expectations regarding loan modifications due to COVID-19 related non-payment; announced a program for lending directly to U.S. businesses; and clarified expectations for certain bank regulations related to counterparty credit risk and the current expected credit loss accounting standard. In addition, the President has signed into law three economic stimulus packages, including the $2 trillion Coronavirus Relief and Economic Security Act, the Families First Coronavirus Response Act, and the Coronavirus Preparedness and Response Supplemental Appropriations Act. Similar actions have been taken or enacted by governments and central banks outside the U.S. However, there can be no assurance that these measures will stimulate the global economy or avert continued recessionary conditions in markets or economies in which we conduct operations. Our participation in and execution of these measures could result in reputational harm, litigation, including class actions, or regulatory and government actions and proceedings. Such actions may result in judgments, settlements, penalties, and fines adverse to the Corporation.

We continue to closely monitor the COVID-19 pandemic and related risks as they evolve globally. The magnitude, duration and likelihood of the current outbreak of COVID-19, further outbreaks of COVID-19, future actions taken by governmental authorities and/or other third parties in response to the COVID-19 pandemic, and its future direct and indirect effects on the global economy and our business and results of operation are highly uncertain. The COVID-19 pandemic may cause prolonged global or national recessionary economic conditions or longer lasting effects on economic conditions than currently exist, which could have a material adverse effect on our business, results of operations and financial condition.

Risks Relating to USD LIBOR Notes

The following discussion of risks specifically relates to USD LIBOR notes and should be read together with (i) the discussions of risks set forth below under “— Risks Relating to the Secured Overnight Financing Rate” and “— Risks Relating to Benchmark Transition Provisions,” (ii) the terms and provisions of the USD LIBOR notes set forth below under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Determination of USD LIBOR, Daily SOFR and Term SOFR — USD LIBOR” and (iii) the benchmark transition provisions set forth under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.” You should carefully consider the following discussion of risks before investing in USD LIBOR notes.

With respect to USD LIBOR notes, the following discussion of risks supersedes and replaces the risk factors set forth under the heading “Risk Factors — Additional Considerations Relating to LIBOR” in the accompanying prospectus supplement and the heading “Risk Factors — Risks Relating to Certain Floating Rate Securities” in the accompanying prospectus.

Interest on a series of USD LIBOR notes will be calculated using a different reference rate if a Benchmark Transition Event and related Benchmark Replacement Date occur with respect to USD LIBOR, and the selection of a Benchmark Replacement could adversely affect the return on, value of, or market for affected USD LIBOR notes.

The U.K. Financial Conduct Authority (the “FCA”), which regulates the London interbank offered rate (“LIBOR”), announced in July 2017 that it will no longer persuade or compel banks to

 

RS-5


Table of Contents

submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR.

As a result, after 2021, it is highly likely that a Benchmark Transition Event and related Benchmark Replacement Date will occur with respect to USD LIBOR. If we or our designee, after consulting with us, determines that a Benchmark Transition Event and related Benchmark Replacement Date have occurred with respect to USD LIBOR, then we or our designee, after consulting with us, will determine the Benchmark Replacement for the affected series of USD LIBOR notes in accordance with the benchmark transition provisions described below under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” in this base rates supplement. After determination of the Benchmark Replacement for the affected series of USD LIBOR notes, interest on such USD LIBOR notes no longer will be determined by reference to USD LIBOR, but instead will be determined by reference to the applicable Benchmark Replacement.

The selection of a Benchmark Replacement, and any decisions, determinations or elections made by us or our designee, after consulting with us, in connection with a Benchmark Replacement with respect to a series of USD LIBOR notes in accordance with the benchmark transition provisions set forth under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” below, including with respect to Benchmark Replacement Conforming Changes, could adversely affect the rate of interest on the relevant series of USD LIBOR notes, which could adversely affect the return on, value of and market for such USD LIBOR notes.

The Benchmark Replacement for USD LIBOR may not be a suitable replacement for USD LIBOR.

The terms of USD LIBOR notes provide for a “waterfall” of alternative rates to be used to determine the interest rate on such USD LIBOR notes if a Benchmark Transition Event and related Benchmark Replacement Date occur and the Interpolated Benchmark cannot be determined. Unless we specify otherwise in the applicable pricing supplement, the first alternative rate in the waterfall is Benchmark Replacement Term SOFR, a forward-looking rate which will be based on SOFR. However, Benchmark Replacement Term SOFR does not exist as of the date of this base rates supplement, and there is no assurance that the development of Benchmark Replacement Term SOFR will be completed or, if completed, will be recommended or selected by the Relevant Governmental Body prior to a Benchmark Transition Event and related Benchmark Replacement Date with respect to any series of USD LIBOR notes. Even if Benchmark Replacement Term SOFR is developed, it is unclear whether it will be a suitable replacement or successor for USD LIBOR. Assuming Benchmark Replacement Term SOFR does not exist at the time of a Benchmark Transition Event and related Benchmark Replacement Date for a series of USD LIBOR notes, unless we specify otherwise in the applicable pricing supplement, the second alternative rate in the waterfall is Benchmark Replacement Compounded SOFR. Benchmark Replacement Compounded SOFR is the compounded average of Daily SOFR that we expect will be calculated in arrears, while USD LIBOR is a forward-looking rate. However, there currently is no uniform market convention with respect to the calculation of Benchmark Replacement Compounded SOFR. Uncertainty with respect to market conventions related to the calculation of Benchmark Replacement Term SOFR and Benchmark Replacement Compounded SOFR and whether either alternative reference rate is a suitable replacement or successor for USD LIBOR may adversely affect the return on, value of and market for the relevant series of USD LIBOR notes.

 

RS-6


Table of Contents

The additional alternative rates applicable with respect to USD LIBOR referenced in the definition of “Benchmark Replacement” set forth under “Description of the Notes — Floating-Rate Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” in this base rates supplement also are uncertain. In particular, the ISDA Fallback Rate, which is the rate referenced in the ISDA Definitions at the time of a Benchmark Transition Event and related Benchmark Replacement Date, has not been established as of the date of this base rates supplement. Even after the ISDA Fallback Rate is initially determined, the ISDA Definitions and the ISDA Fallback Rate may change over time. If each alternative rate applicable with respect to USD LIBOR referenced in the definition of “Benchmark Replacement” is unavailable or indeterminable, we or our designee, after consulting with us, will determine the Benchmark Replacement that will apply to the applicable series of USD LIBOR notes in accordance with the benchmark transition provisions. The substitution of a Benchmark Replacement for USD LIBOR may adversely affect the return on, value of and market for the applicable series of USD LIBOR notes.

Further, there is no assurance that the characteristics of any Benchmark Replacement will be similar to USD LIBOR, or that any Benchmark Replacement will produce the economic equivalent of USD LIBOR as a reference rate for interest on the relevant series of USD LIBOR notes. Although the benchmark transition provisions provide for a Benchmark Replacement Adjustment to be added to the Unadjusted Benchmark Replacement in order to attempt to make the Unadjusted Benchmark Replacement more comparable to USD LIBOR, such adjustment will not necessarily make the Unadjusted Benchmark Replacement equivalent to USD LIBOR. In particular, the ARRC has recommended a one-time Benchmark Replacement Adjustment based on a historical median over a five-year lookback period calculating the difference between USD LIBOR and SOFR. Such an adjustment above the applicable Unadjusted Benchmark Replacement will not respond to changes in unsecured bank credit risk or other market conditions on a periodic basis.

The interest rate on a series of USD LIBOR notes may be determined by reference to a Benchmark Replacement even if USD LIBOR continues to be published.

With respect to any series of USD LIBOR notes, if a Benchmark Transition Event and related Benchmark Replacement Date occur with respect to USD LIBOR for the applicable index maturity, the interest rate on such series of USD LIBOR notes will thereafter be determined by reference to the applicable Benchmark Replacement. A Benchmark Transition Event includes, among other things, a public statement or publication of information by the regulatory supervisor for the administrator of USD LIBOR announcing that USD LIBOR of the applicable index maturity is no longer representative. The interest rate on the relevant series of USD LIBOR notes may, therefore, cease to be determined by reference to USD LIBOR for the applicable index maturity, and instead be determined by reference to a Benchmark Replacement, even if USD LIBOR for such index maturity continues to be published. Such replacement rate may be lower than USD LIBOR for the applicable index maturity for so long as USD LIBOR for such index maturity continues to be published, and the return on, value of and market for the relevant series of USD LIBOR notes may be adversely affected.

Interest on USD LIBOR notes will be calculated using alternative methods if USD LIBOR is not quoted on a particular day and a Benchmark Transition Event and related Benchmark Replacement Date have not occurred.

With respect to any series of USD LIBOR notes, if USD LIBOR for the applicable index maturity is not quoted on the applicable Designated LIBOR Page on a relevant interest determination date, but a Benchmark Transition Event and related Benchmark Replacement Date have not occurred, USD LIBOR for the applicable index maturity will be determined using the applicable alternative method described under “Terms and Provisions Applicable to USD LIBOR

 

RS-7


Table of Contents

Notes, Term SOFR Notes and Compounded SOFR Notes — Determination of USD LIBOR, Daily SOFR and Term SOFR — USD LIBOR” in this base rates supplement. In such case, the final alternative method for determining USD LIBOR for the applicable index maturity with respect to any series of USD LIBOR notes is to use USD LIBOR for such index maturity as in effect for the then-current interest period for such series or, if USD LIBOR for the applicable index maturity is not applicable to such series of USD LIBOR notes on such interest determination date (for example because such series bears interest at a fixed rate on such interest determination date), the final alternative method for determining USD LIBOR for the applicable index maturity is to use the most recent such rate that could have been determined by reference to the applicable Designated LIBOR Page, as described in this base rates supplement.

We or our affiliates may publish research that could affect the market value of USD LIBOR notes.

We or one or more of our affiliates may, at present or in the future, publish research reports with respect to movements in interest rates generally, or the USD LIBOR transition or SOFR specifically. This research may be modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the USD LIBOR notes. Any of these activities may affect the market value of the USD LIBOR notes.

Risks Relating to the Secured Overnight Financing Rate

The following discussion of risks relates to the secured overnight financing rate (“SOFR”) generally. The interest rate for USD LIBOR notes may be determined by reference to, or otherwise based on, SOFR if a Benchmark Transition Event and related Benchmark Replacement Date occur with respect to USD LIBOR. In addition, the base rate for your notes at the issuance date may be term SOFR or compounded SOFR, all as described under the applicable subsections of “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Base Rates for the Notes” in this base rates supplement. You should carefully consider the following discussion of risks relating to SOFR before investing in USD LIBOR notes, term SOFR notes or compounded SOFR notes.

In this discussion, references to “SOFR notes” mean a series of USD LIBOR notes, term SOFR notes or compounded SOFR notes at any time when the interest rate on such series of notes is or will be determined by reference to, or otherwise based on, SOFR.

The composition and characteristics of SOFR are not the same as those of USD LIBOR, and SOFR is not expected to be a comparable substitute, successor or replacement for USD LIBOR.

In June 2017, the Federal Reserve Bank of New York’s Alternative Reference Rates Committee (the “ARRC”) announced SOFR as its recommended alternative to USD LIBOR. However, the composition and characteristics of SOFR are not the same as those of USD LIBOR. SOFR is a broad Treasury repo financing rate that represents overnight secured funding transactions and is not the economic equivalent of USD LIBOR. While SOFR is a secured rate, USD LIBOR is an unsecured rate. And, while SOFR currently is an overnight rate only, USD LIBOR is a forward-looking rate that represents interbank funding for a specified term.

As a result, there can be no assurance that SOFR will perform in the same way as USD LIBOR would have at any time, including, without limitation, as a result of changes in interest and yield rates in the market, bank credit risk, market volatility or global or regional economic, financial, political, regulatory, judicial or other events. For the same reasons, SOFR is not expected to be a comparable substitute, successor or replacement for USD LIBOR. See also “— Any failure of SOFR to gain market acceptance could adversely affect the SOFR notes” below.

 

RS-8


Table of Contents

SOFR has a limited history, and the future performance of SOFR cannot be predicted based on historical performance.

The publication of SOFR began in April 2018, and, therefore, it has a limited history. In addition, the future performance of SOFR cannot be predicted based on the limited historical performance. Future levels of SOFR may bear little or no relation to the historical actual or historical indicative SOFR data. Prior observed patterns, if any, in the behavior of market variables and their relation to SOFR, such as correlations, may change in the future. While some pre-publication historical data has been released by the Federal Reserve Bank of New York (“FRBNY”), production of such historical indicative SOFR data inherently involves assumptions, estimates and approximations. No future performance of SOFR may be inferred from any of the historical actual or historical indicative SOFR data. Hypothetical or historical performance data are not indicative of, and have no bearing on, the potential performance of SOFR.

SOFR may be more volatile than other benchmark or market rates.

Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in other benchmark or market rates, such as USD LIBOR, during corresponding periods. In addition, although changes in term SOFR and compounded SOFR generally are not expected to be as volatile as changes in SOFR on a daily basis, the return on, value of and market for the SOFR notes may fluctuate more than floating rate debt securities with interest rates based on less volatile rates.

Any failure of SOFR to gain market acceptance could adversely affect the SOFR notes.

According to the ARRC, SOFR was developed for use in certain U.S. dollar derivatives and other financial contracts as an alternative to USD LIBOR in part because it is considered a good representation of general funding conditions in the overnight U.S. Treasury repurchase agreement market. However, as a rate based on transactions secured by U.S. Treasury securities, it does not measure bank-specific credit risk and, as a result, is less likely to correlate with the unsecured short-term funding costs of banks. This may mean that market participants would not consider SOFR a suitable substitute, replacement or successor for all of the purposes for which USD LIBOR historically has been used (including, without limitation, as a representation of the unsecured short-term funding costs of banks), which may, in turn, lessen market acceptance of SOFR. Any failure of SOFR to gain market acceptance could adversely affect the return on and value of the SOFR notes and the price at which investors can sell the SOFR notes in the secondary market.

The secondary trading market for SOFR notes may be limited.

If SOFR does not prove to be widely used as a benchmark in securities that are similar or comparable to the SOFR notes, the trading price of the SOFR notes may be lower than those of debt securities with interest rates based on rates that are more widely used. Similarly, market terms for debt securities with interest rates based on SOFR, including, but not limited to, the spread over the reference rate reflected in the interest rate provisions or manner of compounding the reference rate, may evolve over time, and as a result, trading prices of the SOFR notes may be lower than those of later-issued debt securities that are based on SOFR. Investors in the SOFR notes may not be able to sell the SOFR notes at all or may not be able to sell the SOFR notes at prices that will provide them with a yield comparable to similar investments that have a developed secondary market, and may consequently suffer from increased pricing volatility and market risk.

In addition, there currently is no uniform market convention with respect to the implementation of SOFR as a base rate for floating-rate notes or other securities. The manner of

 

RS-9


Table of Contents

calculation and related conventions with respect to the determination of interest rates based on SOFR in floating-rate notes markets may differ materially compared with the manner of calculation and related conventions with respect to the determination of interest rates based on SOFR in other markets, such as the derivatives and loan markets. Investors should carefully consider how any potential inconsistencies between the manner of calculation and related conventions with respect to the determination of interest rates based on SOFR across these markets may impact any hedging or other financial arrangements which they may put in place in connection with any acquisition, holding or disposition of the SOFR notes.

SOFR may be modified or discontinued, and the selection of a Benchmark Replacement could adversely affect the return on, value of, or market for affected SOFR notes.

SOFR is a relatively new rate, and the FRBNY (or a successor), as administrator of SOFR, may make methodological or other changes that could change the value of SOFR, including changes related to the method by which SOFR is calculated, eligibility criteria applicable to the transactions used to calculate SOFR, or timing related to the publication of SOFR. If the manner in which SOFR is calculated is changed, that change may result in a reduction of the amount of interest payable on the SOFR notes, which may adversely affect the trading prices of the SOFR notes. The administrator of SOFR may withdraw, modify, amend, suspend or discontinue the calculation or dissemination of SOFR in its sole discretion and without notice and has no obligation to consider the interests of holders of the SOFR notes in calculating, withdrawing, modifying, amending, suspending or discontinuing SOFR. For purposes of the formula used to calculate interest with respect to a series of SOFR notes, SOFR in respect of a particular date will not be adjusted for any modifications or amendments to SOFR data that the administrator of SOFR may publish after the interest rate on SOFR notes for that day has been determined in accordance with the terms and provisions set forth in this base rates supplement and the applicable pricing supplement.

If we or our designee, after consulting with us, determines that a Benchmark Transition Event and related Benchmark Replacement Date have occurred with respect to a series of SOFR notes, the applicable Benchmark Replacement will replace the then-current Benchmark for all purposes relating to such SOFR notes. If a particular Benchmark Replacement or Benchmark Replacement Adjustment cannot be determined, then the next-available Benchmark Replacement or Benchmark Replacement Adjustment will apply. These replacement rates and adjustments may be selected or formulated by (i) the Relevant Governmental Body (such as the ARRC), (ii) the International Swaps and Derivatives Association, Inc. or any successor thereto (“ISDA”) or (iii) in certain circumstances, us or our designee, after consulting with us.

In addition, the terms of the SOFR notes expressly authorize us or our designee, after consulting with us, in connection with a Benchmark Replacement to make Benchmark Replacement Conforming Changes with respect to, among other things, the determination of interest periods and the timing and frequency of determining rates and making payments of interest and other administrative matters. The application of a Benchmark Replacement and Benchmark Replacement Adjustment, and any implementation of Benchmark Replacement Conforming Changes, could result in adverse consequences to the amount of interest payable on the SOFR notes, which could adversely affect the rate of interest, the return on, value of and market for such SOFR notes and the price at which holders may be able to sell such SOFR Notes.

Further, (i) the composition and characteristics of any Benchmark Replacement in respect of a series of SOFR notes will not be the same as those of the applicable SOFR rate for a series of notes, the Benchmark Replacement will not be the economic equivalent of term SOFR or SOFR, as applicable, there can be no assurance that the Benchmark Replacement will perform in the same way as term SOFR or SOFR, as applicable, would have at any time and there is no guarantee that

 

RS-10


Table of Contents

the Benchmark Replacement will be a comparable substitute for term SOFR or SOFR, as applicable (each of which means that a Benchmark Transition Event could adversely affect the return on, value of and market for the applicable series of SOFR notes), (ii) any failure of the Benchmark Replacement to gain market acceptance could adversely affect the relevant series of SOFR notes, (iii) the Benchmark Replacement may have a very limited history and the future performance of the Benchmark Replacement may not be able to be predicted based on historical performance, (iv) the secondary trading market for debt securities linked to the Benchmark Replacement may be limited and (v) the administrator of the Benchmark Replacement may make changes that could change the value of the Benchmark Replacement or discontinue the Benchmark Replacement and would not have any obligation to consider the interests of holders of the relevant series of SOFR notes in doing so.

We or our affiliates may publish research reports that could affect the market value of SOFR notes.

We or one or more of our affiliates, at present or in the future, may publish research reports with respect to movements in interest rates generally, or with respect to the LIBOR transition to alternative reference rates or SOFR specifically. This research may be modified from time to time without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding SOFR notes. Any of these activities may affect the market value of SOFR notes.

Risks Relating to Term SOFR Notes

The following discussion of risks specifically relates to term SOFR notes and should be read together with (i) the discussions of risks set forth under “— Risks Relating to the Secured Overnight Financing Rate” and “— Risks Relating to Benchmark Transition Provisions,” (ii) the terms and provisions of term SOFR notes set forth below under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — USD LIBOR Notes and Term SOFR Notes” and (iii) the benchmark transition provisions set forth under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.”

We may issue term SOFR notes even though term SOFR does not exist as of the date of this base rates supplement and may not exist as of the original issue date of such term SOFR notes. Any term SOFR notes that we issue before term SOFR exists will provide that interest on such term SOFR notes will be determined by reference to term SOFR beginning on a future date when term SOFR is expected to exist. You should carefully consider the following discussion of risks before investing in term SOFR notes.

Term SOFR does not exist as of the date of this base rates supplement, and the interest rate for the floating rate period applicable to any series of term SOFR notes may be determined based on a rate other than term SOFR.

The interest rate applicable to a series of term SOFR notes is expected to be based on term SOFR, a forward-looking term rate for the index maturity specified in the applicable pricing supplement that in turn will be based on SOFR. Term SOFR does not exist as of the date of this base rates supplement. There is no assurance that the development of a forward-looking term rate based on SOFR for the index maturity specified in the applicable pricing supplement will be completed or, if completed, will be recommended or selected by the Relevant Governmental Body at the time term SOFR becomes applicable to a series of term SOFR notes. Uncertainty surrounding the development of forward-looking term rates based on SOFR and their recommendation or

 

RS-11


Table of Contents

selection by the Relevant Governmental Body could have a material adverse effect on the return on, value of and market for term SOFR notes. If, at the commencement of the floating rate period for any series of term SOFR notes, the Relevant Governmental Body has not selected or recommended term SOFR for the index maturity specified in the applicable pricing supplement, the development of term SOFR for the index maturity specified in the applicable pricing supplement that has been recommended or selected by the Relevant Governmental Body is not complete, or we or the calculation agent or our designee, after consulting with us, determines that the use of term SOFR for the index maturity specified in the applicable pricing supplement is not administratively feasible, then, unless we specify otherwise in the applicable pricing supplement, the first available Benchmark Replacement with respect to term SOFR notes under the benchmark transition provisions will be used to determine the interest rate on the relevant series of term SOFR notes during the applicable floating rate period in respect of such term SOFR notes (unless a Benchmark Transition Event and its related Benchmark Replacement Date occur with respect to such Benchmark Replacement).

In addition, if, at any time when a series of term SOFR notes bears interest at a floating rate based on term SOFR, we or our designee, after consulting with us, determines that a Benchmark Transition Event and related Benchmark Replacement Date have occurred with respect to term SOFR, then we or our designee, after consulting with us, will determine a Benchmark Replacement in accordance with the benchmark transition provisions set forth under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” below. After such determination of a Benchmark Replacement for term SOFR, interest on such series of term SOFR notes no longer will be determined by reference to term SOFR, but instead will be determined by reference to the applicable Benchmark Replacement.

After issuance of a series of term SOFR notes, we or our designee, after consulting with us, is expressly authorized to make certain determinations, decisions or elections with respect to certain terms and provisions of such series of term SOFR notes that we or our designee, after consulting with us, determines are appropriate to reflect the use of term SOFR as the base rate.

After issuance of any series of term SOFR notes, assuming that term SOFR for the applicable index maturity specified in the applicable pricing supplement has been completely developed and has been recommended or selected by the Relevant Governmental Body prior to the time such series of term SOFR notes will begin to accrue interest at a rate determined by reference to term SOFR, we or our designee, after consulting with us, is expressly authorized to make determinations, decisions or elections with respect to the term SOFR conventions, as defined under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Determination of USD LIBOR, Daily SOFR and Term SOFR — Term SOFR” in this base rates supplement, that we or our designee, after consulting with us, decides are appropriate to reflect the use of term SOFR as the base rate for such series of term SOFR notes. For example, because the source and method of publication for term SOFR, if term SOFR is developed, are not currently known, we or our designee, after consulting with us, will need to determine and instruct the calculation agent concerning the manner and timing and other relevant details for the calculation agent’s determination of term SOFR for the relevant index maturity in respect of any series of term SOFR notes. Such determination and implementation of any term SOFR conventions could reduce or otherwise negatively impact the amount of interest that accrues on a series of term SOFR notes, which could adversely affect the return on, value of and market for such series of term SOFR notes.

 

RS-12


Table of Contents

Risks Relating to Compounded SOFR Notes

The following discussion of risks specifically relates to compounded SOFR notes, and should be read together with (i) the discussions of risks set forth under “— Risks Relating to the Secured Overnight Financing Rate” and “— Risks Relating to Benchmark Transition Provisions,” (ii) the terms and provisions of compounded SOFR notes set forth under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Compounded SOFR Notes” and (iii) the benchmark transition provisions set forth under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.” You should carefully consider the following discussion of risks before investing in compounded SOFR notes.

The interest rate on compounded SOFR notes is based on a compounded average of Daily SOFR, which is relatively new in the marketplace.

For each interest period, the interest rate on a series of compounded SOFR notes will be based on a compounded average of Daily SOFR calculated as described under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Compounded SOFR Notes” in this base rates supplement, and not on Daily SOFR published on or in respect of a particular date during such interest period. For this and other reasons, the interest rate on a series of compounded SOFR notes during any interest period may not be the same as the interest rate on other investments bearing interest at a rate based on SOFR that use an alternative method to determine the applicable interest rate. Further, if Daily SOFR in respect of a particular date during an interest period or observation period (if applicable) for a series of compounded SOFR notes is negative, the inclusion of such Daily SOFR in the calculation of compounded SOFR for the applicable interest period will reduce the interest rate and the interest payable on such series of compounded SOFR notes for such interest period.

Limited market precedent exists for securities that use compounded SOFR as the base rate, and the method for calculating an interest rate based upon compounded SOFR in those precedents varies. Accordingly, the specific formula and related conventions used for compounded SOFR notes that we may issue with respect to the determination of interest rates, interest amounts and payment of interest (for example, payment delays, observation periods/lookbacks and/or lockout/suspension periods) may not be widely adopted by other market participants, if at all. Adoption of different methods/conventions by the market with respect to these determinations likely would adversely affect the return on, value of and market for the compounded SOFR notes.

Interest payments due on a series of compounded SOFR notes will be determined only at the end of the relevant interest period.

Interest payments due on a series of compounded SOFR notes will be determined only at the end of the relevant interest period. Therefore, holders of any series of compounded SOFR notes will not know the amount of interest payable with respect to each interest period until shortly prior to the related interest payment date, and it may be difficult for investors in such compounded SOFR notes to estimate reliably the amounts of interest that will be payable on each such interest payment date at the beginning of or during the relevant interest period. In addition, some investors may be unwilling or unable to trade such compounded SOFR notes without changes to their information technology systems, both of which could adversely impact the liquidity and trading price of any series of compounded SOFR notes.

 

RS-13


Table of Contents

With respect to a series of compounded SOFR notes using the payment delay convention, it will not be possible to calculate accrued interest with respect to any period until after the end of such period.

With respect to a series of compounded SOFR notes using the payment delay convention, because Daily SOFR in respect of a given day is not published until the U.S. government securities business day immediately following such day, it will not be possible to calculate accrued interest with respect to any period until after the end of such period, which may adversely affect your ability to trade such notes in the secondary market.

With respect to a series of compounded SOFR notes using the payment delay convention, pursuant to the formula used to determine compounded SOFR for such notes for an applicable interest period, Daily SOFR used in such calculation for any day from, and including, the rate cut-off date to, but excluding, the relevant interest payment date (or maturity or redemption date, if applicable) will be Daily SOFR in respect of the relevant rate cut-off date.

The formula used to determine the base rate for compounded SOFR notes using the payment delay convention employs a rate cut-off date for the final interest period with respect to any series of notes.

For the final interest period with respect to a series of compounded SOFR notes using the payment delay convention, Daily SOFR used in the calculation of compounded SOFR for any day from, and including, the rate cut-off date to, but excluding, the maturity date or the redemption date, if applicable, will be Daily SOFR in respect of the rate cut-off date. The rate cut-off date will be two U.S. government securities business days (or such other number of U.S. government securities business days as we may specify in the applicable pricing supplement) prior to the maturity date (or redemption date, if applicable).

As a result of the foregoing, a holder of a series of compounded SOFR notes using the payment delay convention will not receive the benefit of any increase in the level of SOFR on any date subsequent to the applicable rate cut-off date in connection with the determination of the interest payable with respect to the final interest period for an applicable series of compounded SOFR notes using the payment delay convention, which could reduce the amount of interest that may be payable on the applicable series of notes.

Holders of a series of compounded SOFR notes using the payment delay convention will receive payments of interest on a delayed basis.

The interest payment dates for any series of compounded SOFR notes using the payment delay convention with respect to interest rate determination and interest payments will be two business days (or such other number of business days as we may specify in the applicable pricing supplement) after the interest period demarcation date at the end of each interest period for such series. This convention differs from the interest payment convention that has been used historically for floating-rate notes with interest rates based on other benchmark or market rates, such as USD LIBOR, where interest typically has been paid on a fixed day that immediately follows the final day of the applicable interest period. As a result, holders of a series of compounded SOFR notes using the payment delay convention will receive payments of interest on a delayed basis as compared to floating-rate notes in which they previously may have invested.

 

RS-14


Table of Contents

Risks Relating to Benchmark Transition Provisions

The following discussion of risks relates to the benchmark transition provisions, set forth in this base rates supplement under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.” The benchmark transition provisions will apply if a Benchmark Transition Event and related Benchmark Replacement Date occur with respect to the initial Benchmark at the time of issuance of a series of notes. You should carefully consider the following discussion of risks before investing in any such notes.

We or our designee, after consulting with us, will make determinations with respect to USD LIBOR notes, term SOFR notes or compounded SOFR notes, as applicable, that could affect the return on, value of and market for such notes.

If a Benchmark Transition Event and related Benchmark Replacement Date occur with respect to the initial Benchmark at the time of issuance of any notes, we or our designee, after consulting with us, will determine the Benchmark Replacement and the Benchmark Replacement Adjustment, and will make Benchmark Replacement Conforming Changes with respect to, among other things, the determination of interest periods, the timing and frequency of determining rates and making payments of interest and other administrative matters, in connection with the applicable Benchmark Replacement as described in this base rates supplement under “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes — Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.”

Moreover, certain determinations, decisions and elections with respect to the Benchmark Replacement and any Benchmark Replacement Conforming Changes, or the occurrence or non-occurrence of a Benchmark Transition Event, may require the exercise of discretion and the making of subjective judgments by us or our designee, after consulting with us. Any determination, decision or election made by us or our designee pursuant to the benchmark transition provisions set forth in this base rates supplement will, if made by us, be made in our sole discretion and, if made by our designee, be made after consulting with us and, in each case, will become effective without consent from the holders of the affected notes, or any other party. We may designate an entity to make any determination, decision or election that we have the right to make in connection with the benchmark transition provisions set forth in this base rates supplement. Our designee that we may appoint in connection with these determinations, decisions or elections may be our affiliate. When performing such functions, potential conflicts of interest may exist between us or our designee and holders of the notes. All determinations by us or our designee in our or its discretion will be conclusive for all purposes and binding on us and holders of the applicable notes absent manifest error. In making these potentially subjective determinations, we or our designee may have economic interests that are adverse to your interests, and such determinations may adversely affect the return on, value of and market for the notes.

With respect to USD LIBOR notes maturing after 2021 in particular, because it is highly likely that a Benchmark Transition Event and related Benchmark Replacement Date will occur with respect to USD LIBOR, we or our designee is likely to exercise more discretion in respect of calculating interest payable on a series of USD LIBOR notes than would be the case in the absence of a Benchmark Transition Event and related Benchmark Replacement Date.

 

RS-15


Table of Contents

TERMS AND PROVISIONS APPLICABLE TO USD LIBOR NOTES,

TERM SOFR NOTES AND COMPOUNDED SOFR NOTES

With respect to any series of the notes that we issue, the terms and provisions set forth below, as applicable to such series of the notes, will supersede and replace the terms and provisions relating to the determination of base rates, interest rates, accrual of interest, interest payment dates, interest periods, the calculation of interest amounts and the timing of interest payments with respect to the notes set forth under the headings “Description of the Notes — Floating-Rate Notes” in the accompanying prospectus supplement and “Description of Debt Securities — Floating-Rate Notes” and “— Payment of Principal, Interest, and Other Amounts Payable — Business Day Conventions” in the accompanying prospectus. For the avoidance of doubt, none of the terms and provisions set forth under such headings in the accompanying prospectus supplement and the accompanying prospectus will apply to the notes. In addition, if there is any inconsistency or conflict between the information in this base rates supplement and in any other section of the accompanying prospectus supplement and/or the accompanying prospectus, the information in this base rates supplement will supersede any such inconsistent information in the accompanying prospectus supplement and/or the accompanying prospectus and will govern and control with respect to each series of the notes. Except as so superseded and replaced, the terms and provisions of the notes described in the accompanying prospectus supplement under the heading “Description of the Notes” and in the accompanying prospectus under the heading “Description of Debt Securities” will apply to the notes.

The notes will bear interest at the applicable floating interest rate set forth in the applicable pricing supplement determined in accordance with the terms and provisions set forth below under “— General Terms and Provisions Applicable to the Notes,” “— USD LIBOR Notes and Term SOFR Notes,” “— Compounded SOFR Notes,” “— Determination of USD LIBOR, Daily SOFR and Term SOFR” and “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date,” as applicable.

Base Rates for the Notes

The “base rate” for a series of the notes, as specified in the applicable pricing supplement, will be:

 

   

for a series of USD LIBOR notes, the London interbank offered rate for deposits in U.S. dollars (“USD LIBOR”);

 

   

for a series of term SOFR notes, term SOFR (as defined below), which is expected to be a forward-looking term rate based on the secured overnight financing rate; or

 

   

for a series of compounded SOFR notes, compounded SOFR (as defined below), calculated by reference to the secured overnight financing rate.

Unless otherwise set forth in the applicable pricing supplement, the applicable base rate with respect to a series of the notes will be determined for each interest period (as defined below) or observation period (as defined below), as applicable, as set forth under “— Determination of USD LIBOR, Daily SOFR and Term SOFR” and “— USD LIBOR Notes and Term SOFR Notes” or “— Compounded SOFR Notes,” below, as applicable. Such determination of the applicable base rates is summarized as follows:

 

   

USD LIBOR notes and term SOFR notes. With respect to USD LIBOR notes and term SOFR notes, the applicable base rate will be determined for an interest period in advance by

 

RS-16


Table of Contents
 

reference to such base rate for the period of maturity of the instrument or obligation from which the base rate is calculated (the “index maturity”), as observed at a specified time on a single interest determination date on or prior to the commencement of such period, all as set forth in this base rates supplement and/or in the applicable pricing supplement. Such base rate as so determined will apply for the entirety of the succeeding interest period and will reset on the interest reset date specified for the interest period that immediately follows such succeeding period, in accordance with the foregoing. For additional information with respect to the determination of these base rates and terms and provisions of these notes, see “— USD LIBOR Notes and Term SOFR Notes” and “— Determination of USD LIBOR, Daily SOFR and Term SOFR,” below.

 

   

Compounded SOFR notes. With respect to compounded SOFR notes, the base rate for an interest period will be determined on the basis of a compounded average of Daily SOFR (as defined under “— Determination of USD LIBOR, Daily SOFR and Term SOFR,” below) as set forth below under “— Compounded SOFR Notes,” in accordance with the payment delay convention or the observation period convention, as specified in the applicable pricing supplement (such rate, “compounded SOFR”). As so set forth, compounded SOFR will be determined in arrears at or near the end of each interest period in accordance with a formula using Daily SOFR published during the interest period or observation period, as applicable, relating to such interest period, as the case may be. For additional information with respect to the determination of compounded SOFR for an interest period, and the conventions therefor, and the terms and provisions of compounded SOFR notes, see “— Compounded SOFR Notes” and “— Determination of USD LIBOR, Daily SOFR and Term SOFR” below.

General Terms and Provisions Applicable to the Notes

Unless we specify otherwise in the applicable pricing supplement, the terms and provisions of and other information with respect to the notes set forth in this subsection “— General Terms and Provisions Applicable to the Notes” will apply to each series of the notes, as and to the extent set forth in this subsection.

Determination of Interest Rates

Unless we specify otherwise in the applicable pricing supplement, the interest rate for a series of the notes will be determined by reference to:

 

   

the specified base rate (based on the specified index maturity, if applicable) for each interest period determined in accordance with the applicable provisions set forth in this base rates supplement;

 

   

plus or minus the spread, if any; and/or

 

   

multiplied by the spread multiplier, if any.

The “spread” is the number of basis points we specify to be added to or subtracted from the applicable base rate. The “spread multiplier” is the percentage (or number) we may specify by which the specified base rate is multiplied in order to calculate the applicable interest rate.

Interest rates for a series of the notes also may be subject to:

 

   

a maximum interest rate limit, or ceiling, on the interest that may accrue during any interest period;

 

RS-17


Table of Contents
   

a minimum interest rate limit, or floor, on the interest that may accrue during any interest period; or

 

   

both.

In addition, the interest rate on a series of the notes may not be higher than the maximum rate permitted by New York law, as that rate may be modified by U.S. law of general application. Under current New York law, the maximum rate of interest, subject to some exceptions, for any loan in an amount less than $250,000 is 16% and for any loan in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a simple interest basis. These limits do not apply to loans of $2,500,000 or more to any one borrower.

Additional information with respect to the determination of interest rates on the notes is set forth below under “— USD LIBOR Notes and Term SOFR Notes” and “— Compounded SOFR Notes,” as applicable.

Accrual of Interest, Interest Payment Dates and Interest Periods for Notes Other than Compounded SOFR Notes Using the Payment Delay Convention

Unless we specify otherwise in the applicable pricing supplement, except for compounded SOFR notes using the payment delay convention:

 

   

the notes of each series will accrue interest from the original issue date or from the most recent date to which interest on such notes has been paid or made available for payment;

 

   

interest will accrue on the principal amount of a series of notes at the applicable per annum floating interest rate until the principal amount is paid or made available for payment;

 

   

we will pay accrued interest on any series of notes monthly, quarterly, semi-annually or annually (or for such other period as we may specify in the applicable pricing supplement), as applicable, in arrears, on the dates set forth in the applicable pricing supplement (each such day being an “interest payment date” for such series of notes ) and at maturity;

 

   

each interest payment due on an interest payment date or maturity date will include interest accrued from, and including, the most recent interest payment date to which interest has been paid, or, if no interest has been paid, from the original issue date, to, but excluding, the next interest payment date or the maturity date, as the case may be (each such period, an “interest period”); and

 

   

interest payment dates and interest periods for each series of notes may be adjusted in accordance with the business day convention (as described below under “— Business Day Conventions”) specified in the applicable pricing supplement.

For compounded SOFR notes using the payment delay convention, unless we specify otherwise in the applicable pricing supplement, the accrual of interest, interest period demarcation dates, interest payment dates and interest periods are as set forth under “— Compounded SOFR Notes — Payment Delay Convention” below.

Calculation of Interest Amounts

Unless we specify otherwise in the applicable pricing supplement, the amount of accrued interest on a series of notes for an interest period is calculated by multiplying the principal amount

 

RS-18


Table of Contents

of such note by an accrued interest factor. This accrued interest factor will be determined by multiplying the per annum floating interest rate determined by reference to the applicable base rate, as determined for the applicable interest period, by a factor resulting from the day count convention that applies with respect to such determination. The factor resulting from the day count convention will be, if so specified in the applicable pricing supplement, one of the following, or may be any other convention set forth in the applicable pricing supplement:

 

   

a factor based on a 360-day year of twelve 30-day months if the day count convention specified in the applicable pricing supplement is “30/360”;

 

   

a factor equal to the actual number of days in the relevant period divided by 360 if the day count convention specified in the applicable pricing supplement is “Actual/360”;

 

   

a factor equal to the actual number of days in the relevant period divided by 365, or if any portion of that relevant period falls in a leap year, the sum of (A) the actual number of days in that portion of the relevant period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the relevant period falling in a non-leap year divided by 365, if the day count convention specified in the applicable pricing supplement is “Actual/Actual”; or

 

   

a factor equal to the actual number of days in the relevant period divided by 365, if the day count convention specified in the applicable pricing supplement is “Actual/365 (Fixed).”

If no day count convention is specified in the applicable pricing supplement, the accrued interest factor will be equal to the actual number of days in the relevant period divided by 360.

Rounding Conventions

All amounts used in or resulting from any calculation with respect to a series of notes, including calculations of amounts of accrued interest for any interest period for such series will be rounded to the nearest cent, in the case of U.S. dollars, or to the nearest corresponding hundredth of a unit, in the case of a currency other than U.S. dollars, with one-half cent or one-half of a corresponding hundredth of a unit or more being rounded upward. Unless we specify otherwise in the applicable pricing supplement, all percentages resulting from any calculation with respect to a series of notes, including determinations of USD LIBOR, term SOFR and compounded SOFR (in accordance with the formula defined in this base rates supplement), as applicable, for any interest period for such series, will be rounded, if necessary, to the nearest one hundred-thousandth of a percent, with five one-millionths of a percentage point rounded upwards, e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655).

USD LIBOR Notes and Term SOFR Notes

Unless otherwise specified in the applicable pricing supplement, the following terms and provisions and other information will apply to each series of USD LIBOR notes and term SOFR notes, as applicable. References to “notes” in this subsection “— USD LIBOR Notes and Term SOFR Notes” are to a series of any such notes.

With respect to any series of term SOFR notes, if any of the terms and provisions set forth in this section “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes” concerning the determination of term SOFR, the interest rate, amounts of accrued interest or payment of interest that otherwise would be applicable to term SOFR notes are inconsistent with any of the term SOFR conventions (as defined below) determined by us or our designee, after consulting with us, then the relevant term SOFR conventions will govern and control with respect to such term SOFR notes.

 

RS-19


Table of Contents

Unless we specify otherwise in the applicable pricing supplement, the applicable base rate, interest rate and calculation dates for amounts of accrued interest in respect of each interest period with respect to a series of USD LIBOR notes or term SOFR notes, as applicable, will be determined in accordance with the following terms and provisions set forth in this subsection and in the other sections and subsections of this base rates supplement referenced below in this subsection. See “— General Terms and Provisions Applicable to the Notes” for a description of additional terms and provisions of the notes relating to the determination of interest rates, accrual of interest, interest payment dates, interest periods, calculation of interest amounts and rounding conventions that will be applicable with respect to each series of USD LIBOR notes or term SOFR notes, as applicable, unless we specify otherwise in the applicable pricing supplement.

The calculation agent will determine USD LIBOR or term SOFR, as applicable, for the applicable index maturity (if any) and for a given interest determination date (as defined below) in accordance with the terms and provisions set forth below under “— Determination of USD LIBOR, Daily SOFR and Term SOFR.”

The interest rate in effect from, and including, the original issue date of a series of notes to, but excluding, the first interest reset date (as defined below) for such notes will be the initial interest rate set forth in the applicable pricing supplement or determined as set forth in the applicable pricing supplement. The interest rate of a series of notes may be reset daily, weekly, monthly, quarterly, semi-annually, or annually, or at any other interval, as we specify in the applicable pricing supplement. If so specified in the applicable pricing supplement, a single interest period may contain multiple interest reset dates, in which case the interest rate with respect to the applicable series of notes will reset on each such interest reset date in accordance with the terms and provisions set forth in this subsection or as otherwise set forth in the applicable pricing supplement, and interest will accrue on such series of notes at the interest rate in effect from time to time during such interest period. We refer to each date on which the interest rate for a series of notes will reset as an “interest reset date.” We will specify the interest reset dates in the applicable pricing supplement. Interest reset dates may be adjusted in accordance with the applicable business day convention (as described below under “— Business Day Conventions”) specified in the applicable pricing supplement.

The “interest determination date” in respect of any interest reset date is the day to which the calculation agent will refer when determining the interest rate at which the applicable floating interest rate will reset. Unless we specify otherwise in the applicable pricing supplement, the interest determination date for an interest reset date will be:

 

   

for a USD LIBOR note, the second London Banking Day (as defined below) preceding the interest reset date; and

 

   

for a term SOFR note, the date specified in the applicable pricing supplement or determined in accordance with the term SOFR conventions.

The calculation agent will determine the interest rate for an interest period on the corresponding interest determination date. In addition, on the relevant calculation date (as defined below), the calculation agent will calculate the amount of interest that has accrued during each interest period in accordance with the provisions set forth under “— General Terms and Provisions Applicable to the Notes — Accrual of Interest, Interest Payment Dates and Interest Periods for the Notes Other than Compounded SOFR Notes Using the Payment Delay Convention” and “— General Terms and Provisions Applicable to the Notes — Calculation of Interest Amounts” above. Unless we specify otherwise in the applicable pricing supplement, the “calculation date” for any interest determination date will be the date by which the calculation agent computes the amount of interest owed on a series of notes for the related interest period. Unless we specify

 

RS-20


Table of Contents

otherwise in the applicable pricing supplement, the calculation date pertaining to an interest determination date will be the earlier of:

 

   

the tenth calendar day after that interest determination date or, if that day is not a business day, the next succeeding business day; or

 

   

the business day immediately preceding the applicable interest payment date for the interest period to which such interest determination date relates, the maturity date, or the date of redemption or prepayment, as the case may be.

In determining the base rate that applies to a USD LIBOR note during a particular interest period, unless we specify otherwise in the applicable pricing supplement, the calculation agent may obtain rate quotes from various banks or dealers active in the relevant market, as described below under “— Determination of USD LIBOR, Daily SOFR and Term SOFR” and/or in the applicable pricing supplement. Those reference banks and dealers may include the calculation agent itself and its affiliates, as well as any underwriter, dealer or agent participating in the distribution of the relevant USD LIBOR notes and its affiliates, and they may include our affiliates.

At the request of the holder of any USD LIBOR note or term SOFR note, the calculation agent will provide the interest rate then in effect for that series of notes and, if already determined, the interest rate that is to take effect on the next interest reset date.

Compounded SOFR Notes

Unless otherwise specified in the applicable pricing supplement, the following terms and provisions and other information will apply to compounded SOFR notes.

For a series of compounded SOFR notes, compounded SOFR, accrued interest, interest periods, the interest rate and/or timing of interest payments for a particular interest period will be determined in accordance with a “payment delay convention” or “observation period convention,” in accordance with the terms and provisions applicable to either such convention as set forth below. The applicable pricing supplement relating to a series of compounded SOFR notes will specify whether the “payment delay convention” or the “observation period convention” applies to such compounded SOFR notes.

Payment Delay Convention

If the applicable pricing supplement for a series of compounded SOFR notes specifies that the “payment delay convention” applies, then, unless we specify otherwise in the applicable pricing supplement, the following terms and provisions will apply to such series. References to “notes” in this subsection “— Payment Delay Convention” are to compounded SOFR notes using the payment delay convention.

For a series of compounded SOFR notes using the payment delay convention, unless we specify otherwise in the applicable pricing supplement, compounded SOFR, the interest rate, accrued interest, the date on which the foregoing will be calculated by the calculation agent with respect to an interest period, interest periods and timing of interest payments for a particular interest period will be determined in accordance with the following terms and provisions set forth in this subsection and in the other sections and subsections of this base rates supplement referenced below in this subsection. See “— General Terms and Provisions Applicable to the Notes” for a description of additional terms and provisions of the notes relating to the determination of interest rates and calculation of interest amounts (other than with respect to the accrual of interest, interest payment

 

RS-21


Table of Contents

dates, interest periods and the timing of such calculation of interest amounts, which will be as set forth below in this subsection) and rounding conventions that will be applicable with respect to a series of compounded SOFR notes using the payment delay convention, unless we specify otherwise in the applicable pricing supplement.

Each series of the notes will accrue interest from the original issue date of such series until the principal amount is paid or made available for payment. We will pay interest on a series of the notes on each interest payment date (as defined below) with respect to such series of notes. Each interest payment due on an interest payment date or maturity date will include interest accrued from, and including, the most recent interest period demarcation date to which interest has been paid, or, if no interest has been paid, from the original issue date, to, but excluding, the next interest period demarcation date (or, in the case of the final interest period, the maturity date or, if such notes are redeemed, the redemption date) (each such period, an “interest period” for such series of notes). The applicable pricing supplement for a series of notes will specify, among other terms and provisions, the “interest period demarcation dates” with respect to such series.

Unless we specify otherwise in the applicable pricing supplement, interest period demarcation dates and interest periods (in addition to interest payment dates) may be adjusted in accordance with the business day convention specified in the applicable pricing supplement. If the scheduled final interest period demarcation date (which will be the maturity date or, if we elect to redeem the notes, the redemption date) falls on a day that is not a business day, the payment of principal and interest will be made on the next succeeding business day, and such final interest period demarcation date will be postponed to such succeeding business day.

We will pay interest on each series of the notes in arrears, on the second business day following each interest period demarcation date, unless we specify otherwise in the applicable pricing supplement (each such day being an “interest payment date” for such notes); provided that the interest payment date with respect to the final interest period for a series of the notes will be the maturity date for such series or, if the notes are redeemed, the redemption date. On each interest payment date, we will pay accrued interest for the most recently completed interest period.

The interest rate for a series of the notes will be determined by reference to compounded SOFR, calculated in respect of each interest period in accordance with the formula set forth below. For purposes of calculating compounded SOFR in accordance with such formula with respect to the final interest period, Daily SOFR for each U.S. government securities business day in the period from, and including, the rate cut-off date to, but excluding, the maturity date or redemption date, as applicable, will be Daily SOFR in respect of such rate cut-off date. Unless we specify otherwise in the applicable pricing supplement, the “rate cut-off date” will be the second U.S. government securities business day prior to the maturity date or redemption date, as applicable.

The calculation agent will determine compounded SOFR for a series of the notes for each interest period in accordance with the following formula:

 

LOGO

where:

“d0”, for any interest period, is the number of U.S. government securities business days in such interest period;

i” is a series of whole numbers from one to d0, each representing the relevant U.S. government securities business days in chronological order from, and including, the first U.S. government securities business day in such interest period;

 

RS-22


Table of Contents

“SOFRi” for any U.S. government securities business day “i” in such interest period, is equal to Daily SOFR in respect of that day, determined by the calculation agent; provided that, for purposes of calculating compounded SOFR with respect to the final interest period, Daily SOFR for each U.S. government securities business day in the period from, and including, the rate cut-off date to, but excluding, the maturity date or redemption date, as applicable, will be Daily SOFR in respect of such rate cut-off date;

“ni” for U.S. government securities business day “i” in such interest period, is the number of calendar days from, and including, such U.S. government securities business day “i” to, but excluding, the following U.S. government securities business day; and

“d” is the number of calendar days in such interest period.

When the calculation agent determines compounded SOFR for a particular interest period in accordance with the foregoing formula, it will determine the Daily SOFR component of such formula for a U.S. government securities business day in accordance with the terms and provisions set forth below under “— Determination of USD LIBOR, Daily SOFR and Term SOFR — Daily SOFR.” Daily SOFR will not be published in respect of any day that is not a U.S. government securities business day, such as a Saturday, Sunday or holiday. For this reason, when the calculation agent determines compounded SOFR for a particular interest period in accordance with the foregoing formula, Daily SOFR for any U.S. government securities business day in such period that immediately precedes one or more days in such period that are not U.S. government securities business days will be, for purposes of calculating compounded SOFR for a particular interest period, multiplied by the number of calendar days from, and including, such U.S. government securities business day to, but excluding, the following U.S. government securities business day.

The calculation agent will determine compounded SOFR, the interest rate and accrued interest for each interest period in arrears as soon as reasonably practicable on or after the interest period demarcation date at the end of such interest period (or, in the case of the final interest period, the rate cut-off date) and prior to the relevant interest payment date and will notify us of compounded SOFR and such interest rate and accrued interest for each interest period as soon as reasonably practicable after such determination, but in any event by the business day immediately prior to the interest payment date, unless we specify otherwise in the applicable pricing supplement. At the request of a holder of a series of the notes, the calculation agent will provide compounded SOFR, the interest rate and the amount of interest accrued with respect to any interest period for such series, after compounded SOFR and such interest rate and accrued interest have been determined.

Observation Period Convention

If the applicable pricing supplement for a series of compounded SOFR notes specifies that the “observation period convention” applies, then, unless we specify otherwise in the applicable pricing supplement, the following terms and provisions will apply to such series. References to “notes” in this subsection “— Observation Period Convention” are to compounded SOFR notes using the observation period convention.

For a series of compounded SOFR notes using the observation period convention, unless we specify otherwise in the applicable pricing supplement, compounded SOFR, the interest rate, accrued interest and the date on which the foregoing will be calculated by the calculation agent with respect to an interest period will be determined in accordance with the following terms and provisions set forth in this subsection and in the other sections and subsections of this base rates supplement referenced below in this subsection. See “— General Terms and Provisions Applicable to the Notes” for a description of additional terms and provisions of the notes relating to the determination of interest rates, accrual of interest, interest payment dates, interest periods and

 

RS-23


Table of Contents

calculation of interest amounts (other than the timing of such calculation, which will be as set forth below in this subsection) and rounding conventions that will be applicable with respect to each series of compounded SOFR notes using the observation period convention, unless we specify otherwise in the applicable pricing supplement.

The interest rate for each interest period for a series of the notes will be determined by reference to compounded SOFR, calculated in accordance with the formula set forth below by the calculation agent with respect to the observation period relating to such interest period. Unless otherwise specified in the applicable pricing supplement, the “observation period” in respect of each interest period for a series of the notes will be the period from, and including, the date that is two U.S. government securities business days preceding the first date in such interest period to, but excluding, the date that is two U.S. government securities business days preceding the interest payment date for such interest period.

Unless we specify otherwise in the applicable pricing supplement, each interest payment due on an interest payment date or maturity date for a series of the notes will include interest accrued from, and including, the most recent interest payment date to which interest has been paid, or, if no interest has been paid, from the original issue date, to, but excluding, the next interest payment date or the maturity date, as the case may be (each such period, an “interest period” for such series of notes).

The calculation agent will determine compounded SOFR for a series of the notes for each interest period (by reference to the related observation period) in accordance with the following formula:

 

LOGO

where:

“d0”, for any observation period, is the number of U.S. government securities business days in such observation period;

i” is a series of whole numbers from one to d0, each representing the relevant U.S. government securities business days in chronological order from, and including, the first U.S. government securities business day in such observation period;

“SOFRi” for any U.S. government securities business day “i” in such observation period, is equal to Daily SOFR in respect of that day, determined by the calculation agent;

“ni” for U.S. government securities business day “i” in such observation period, is the number of calendar days from, and including, such U.S. government securities business day “i” to, but excluding, the following U.S. government securities business day; and

“d” is the number of calendar days in such observation period.

When the calculation agent determines compounded SOFR for a particular interest period in accordance with the foregoing formula, it will determine the Daily SOFR component of such formula for a U.S. government securities business day in accordance with the terms and provisions set forth below under “— Determination of USD LIBOR, Daily SOFR and Term SOFR — Daily SOFR.” For purposes of such calculation of compounded SOFR, the calculation agent will refer to

 

RS-24


Table of Contents

Daily SOFR in respect of the U.S. government securities business days in the observation period relating to such interest period. Daily SOFR will not be published in respect of any day that is not a U.S. government securities business day, such as a Saturday, Sunday or holiday. For this reason, when the calculation agent determines compounded SOFR for a particular interest period in accordance with the foregoing formula (by reference to the related observation period), Daily SOFR for any U.S. government securities business day that immediately precedes one or more days in such related observation period that are not U.S. government securities business days will be, for purposes of calculating compounded SOFR for a particular interest period, multiplied by the number of calendar days from, and including, such U.S. government securities business day to, but excluding, the following U.S. government securities business day.

The calculation agent will determine compounded SOFR, the interest rate and accrued interest for each interest period in arrears as soon as reasonably practicable on or after the last day of the applicable observation period and prior to the relevant interest payment date and will notify us of compounded SOFR and such interest rate and accrued interest for each interest period as soon as reasonably practicable after such determination, but in any event by the business day immediately prior to the interest payment date. At the request of a holder of a series of the notes, the calculation agent will provide compounded SOFR, the interest rate and the amount of interest accrued with respect to any interest period, after compounded SOFR and such interest rate and accrued interest have been determined.

Determination of USD LIBOR, Daily SOFR and Term SOFR

Unless otherwise specified in the applicable pricing supplement, the terms and provisions set forth below with respect to the determination of USD LIBOR, Daily SOFR and term SOFR will apply to applicable series of notes.

USD LIBOR.    Unless otherwise specified in the applicable pricing supplement, “USD LIBOR” for any interest determination date will be the London interbank offered rate for deposits in U.S. dollars having the index maturity specified in the applicable pricing supplement, determined as the arithmetic mean of the offered rates for deposits in U.S. dollars having such index maturity, commencing on the related interest reset date, that appear on the Designated LIBOR Page as of 11:00 a.m., London time, on that interest determination date, if at least two offered rates appear on the Designated LIBOR Page, except that, if the Designated LIBOR Page by its terms provides only for a single rate, that single rate will be used.

If (i) fewer than two offered rates described above appear on the Designated LIBOR Page (ii) or no rate appears and the Designated LIBOR Page by its terms provides only for a single rate, then the calculation agent will determine LIBOR as follows:

 

   

We will select and identify to the calculation agent four major banks in the London interbank market, and the calculation agent will request each such bank to provide a quotation of the rate at which deposits in U.S. dollars in a representative amount having an index maturity specified in the applicable pricing supplement commencing on the interest reset date relating to such interest determination date are offered by it to prime banks in the London interbank market, at approximately 11:00 a.m. London time, on that interest determination date.

 

   

If at least two quotations are provided, the calculation agent will determine USD LIBOR as the arithmetic average of the quotations provided.

 

   

If fewer than two quotations are provided, we will select and identify to the calculation agent three major banks in New York City, and the calculation agent will request each of such

 

RS-25


Table of Contents
 

banks to provide a quotation of the rate offered by it at approximately 11:00 a.m., New York City time, on the interest determination date for loans in U.S. dollars to leading European banks in a representative amount having an index maturity specified in the applicable pricing supplement commencing on the interest reset date relating to such interest determination date. If three quotations are provided, the calculation agent will determine USD LIBOR as the arithmetic average of the quotations provided.

 

   

Otherwise, USD LIBOR will be equal to USD LIBOR in effect for the then-current interest period or, if USD LIBOR is not applicable to the then-current interest period (for example because the note bears interest at a fixed rate for the then-current interest period), the most recent rate that could have been determined in accordance with the first sentence of the preceding paragraph.

Notwithstanding the foregoing, if we or our designee, after consulting with us, determines on or prior to the relevant interest determination date that a Benchmark Transition Event and related Benchmark Replacement Date (each as defined below) have occurred with respect to USD LIBOR of the applicable index maturity, then the benchmark transition provisions set forth below under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” will thereafter apply to all determinations of the base rate payable on the relevant USD LIBOR notes. In accordance with the benchmark transition provisions, after a Benchmark Transition Event and related Benchmark Replacement Date have occurred, the amount of interest that will be payable for each applicable interest period will be determined by reference to a rate per annum equal to the Benchmark Replacement (as defined below) plus or minus the spread, or multiplied by the spread multiplier, specified in the applicable pricing supplement.

As used in the foregoing terms and provisions relating to the determination of USD LIBOR:

“Representative amount” means, unless we specify otherwise in the applicable pricing supplement, $1,000,000.

“Designated LIBOR Page” means the display on the Thomson Reuters Eikon service, or any successor or replacement service (“Reuters”), on page LIBOR01, or such other page as designated in the applicable pricing supplement, for the purpose of displaying the London interbank rates of major banks for U.S. dollars, or any successor or replacement page or pages on that service.

Certain other capitalized terms used in the foregoing terms and provisions relating to determination of USD LIBOR have the meanings set forth under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.”

Daily SOFR. Unless otherwise specified in the applicable pricing supplement, “Daily SOFR” means, with respect to any U.S. government securities business day prior to a Benchmark Replacement Date:

 

  (1)

the Secured Overnight Financing Rate published for such U.S. government securities business day as such rate appears on the SOFR Administrator’s Website at 3:00 p.m. (New York City time) on the immediately following U.S. government securities business day; or

 

  (2)

if the rate specified in (1) above does not so appear, the Secured Overnight Financing Rate as published in respect of the first preceding U.S. government securities business day for which the Secured Overnight Financing Rate was published on the SOFR Administrator’s Website.

If we or our designee, after consulting with us, determines that a Benchmark Transition Event and related Benchmark Replacement Date have occurred prior to the applicable Reference Time in

 

RS-26


Table of Contents

respect of any determination of the Benchmark on any date as described under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” below, then the benchmark transition provisions set forth below under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” will thereafter apply to all determinations of the interest rate payable on the relevant notes. In accordance with the benchmark transition provisions, after a Benchmark Transition Event and related Benchmark Replacement Date have occurred, the amount of interest that will be payable for each applicable interest period will be determined by reference to a per annum rate equal to the Benchmark Replacement plus or minus the spread, or multiplied by the spread multiplier, specified in the applicable pricing supplement.

As used in the foregoing terms and provisions relating to determination of Daily SOFR:

“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the Secured Overnight Financing Rate); and

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, or any successor source. The information contained on such website is not part of this base rates supplement and is not incorporated in this base rates supplement by reference.

Certain other capitalized terms used in the foregoing terms and provisions relating to determination of Daily SOFR have the meanings set forth under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.”

Term SOFR.    Unless otherwise specified in the applicable pricing supplement, “term SOFR” means the forward-looking term rate based on the secured overnight financing rate that has been selected or recommended by the Relevant Governmental Body for the index maturity specified in the applicable pricing supplement that is published by the term SOFR administrator at the time specified in the applicable pricing supplement for any interest period, as determined by the calculation agent after giving effect to the term SOFR conventions. If any other terms and provisions in this section “Terms and Provisions Applicable to USD LIBOR Notes, Term SOFR Notes and Compounded SOFR Notes” concerning the calculation of the interest rate and the payment of interest that would otherwise be applicable to term SOFR notes are inconsistent with any of the term SOFR conventions determined by us or our designee, after consulting with us, then the relevant term SOFR conventions will govern and control.

Notwithstanding the foregoing paragraph, with respect to term SOFR notes, if we or our designee, after consulting with us, determines that a Benchmark Transition Event and related Benchmark Replacement Date have occurred prior to the applicable Reference Time in respect of any determination of the Benchmark on any date, then the benchmark transition provisions set forth below under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” will thereafter apply to all determinations of the interest rate payable on the relevant term SOFR notes. In accordance with the benchmark transition provisions, after a Benchmark Transition Event and related Benchmark Replacement Date have occurred, the amount of interest that will be payable for each applicable interest period will be determined by reference to a rate per annum equal to the Benchmark Replacement plus or minus the spread, or multiplied by the spread multiplier, specified in the applicable pricing supplement.

As used in the foregoing terms and provisions relating to the determination of term SOFR:

“Relevant Governmental Body” has the meaning set forth below under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.”

“term SOFR administrator” means any entity designated by the Relevant Governmental Body as the administrator of term SOFR (or a successor administrator).

 

RS-27


Table of Contents

“term SOFR conventions” means any determination, decision or election with respect to (1) the manner and timing of the publication of term SOFR, (2) interest determination dates, interest payment dates or interest periods, (3) the manner, timing and frequency of determining rates and amounts of interest that are payable on any term SOFR notes and the conventions relating to such determination, (4) the timing and frequency of making payments of interest, (5) rounding conventions, (6) tenors and (7) any other terms or provisions of the relevant term SOFR notes, as applicable, in each case that we or our designee, after consulting with us, determines may be appropriate to reflect the use of term SOFR as the Benchmark in a manner substantially consistent with market practice (or, if we, the calculation agent or our designee, after consulting with us, determines that adoption of any portion of such market practice is not administratively feasible or if we or our designee, after consulting with us, determines that no market practice for the use of term SOFR exists, in such other manner as we or our designee, after consulting with us, determines is appropriate).

Certain other capitalized terms used in the foregoing terms and provisions relating to determination of term SOFR have the meanings set forth under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date.”

Effect of a Benchmark Transition Event and Related Benchmark Replacement Date

Unless we specify otherwise in the applicable pricing supplement, the provisions set forth in this subsection “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date,” which we refer to as the “benchmark transition provisions,” will apply to all series of the notes.

Benchmark Replacement.    If we or our designee, after consulting with us, determines on or prior to the relevant Reference Time that a Benchmark Transition Event and related Benchmark Replacement Date have occurred with respect to the then-current Benchmark for any series of notes, the applicable Benchmark Replacement will replace the then-current Benchmark for such series of notes for all purposes relating to the relevant notes in respect of all determinations on such date and for all determinations on all subsequent dates.

Benchmark Replacement Conforming Changes.    In connection with the implementation of a Benchmark Replacement, we or our designee, after consulting with us, will have the right to make Benchmark Replacement Conforming Changes from time to time.

Certain Defined Terms.    As used in this base rates supplement with respect to any Benchmark Transition Event and implementation of the applicable Benchmark Replacement and Benchmark Replacement Conforming Changes:

“Benchmark” means, initially, (i) with respect to USD LIBOR notes, USD LIBOR for the index maturity specified in the applicable pricing supplement; (ii) with respect to term SOFR notes, term SOFR for the index maturity indicated in the applicable pricing supplement and (iii) with respect to compounded SOFR notes, Daily SOFR; provided, in each case, that if a Benchmark Transition Event and related Benchmark Replacement Date have occurred with respect to such initial Benchmark, as applicable, or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.

“Benchmark Replacement” means:

 

  (A)

with respect to USD LIBOR notes, the Interpolated Benchmark with respect to the then-current Benchmark, plus the Benchmark Replacement Adjustment for such Benchmark; provided that if the calculation agent cannot determine the Interpolated Benchmark as of

 

RS-28


Table of Contents
  the Benchmark Replacement Date, then “Benchmark Replacement” means the first alternative set forth in the order below that can be determined by us or our designee, after consulting with us, as of the Benchmark Replacement Date:

 

  (1)

the sum of: (a) Benchmark Replacement Term SOFR and (b) the Benchmark Replacement Adjustment;

 

  (2)

the sum of: (a) Benchmark Replacement Compounded SOFR and (b) the Benchmark Replacement Adjustment;

 

  (3)

the sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor (if any) and (b) the Benchmark Replacement Adjustment;

 

  (4)

the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement Adjustment;

 

  (5)

the sum of: (a) the alternate rate of interest that has been selected by us or our designee, after consulting with us, as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating-rate notes at such time and (b) the Benchmark Replacement Adjustment;

 

  (B)

with respect to term SOFR notes, the Interpolated Benchmark with respect to the then-current Benchmark, plus the Benchmark Replacement Adjustment for such Benchmark; provided that if (a) the calculation agent cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date or (b) the then-current Benchmark is term SOFR and a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to term SOFR (in which event no Interpolated Benchmark with respect to term SOFR shall be determined), then “Benchmark Replacement” means the first of alternatives (2), (3), (4) and (5) set forth in the list set forth under (A) above, in the order in which such alternatives appear in such list, that can be determined by us or our designee, after consulting with us as of the Benchmark Replacement Date; and

 

  (C)

with respect to compounded SOFR notes, the first of alternatives (3), (4) and (5) set forth in the list set forth under (A) above, in the order in which such alternatives appear in such list, that can be determined by us or our designee, after consulting with us, as of the Benchmark Replacement Date.

“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by us or our designee, after consulting with us, as of the Benchmark Replacement Date:

 

  (1)

the spread adjustment (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body or determined by us or our designee, after consulting with us, in accordance with the method for calculating or determining such spread adjustment that has been selected or recommended by the Relevant Governmental Body, in each case for the applicable Unadjusted Benchmark Replacement;

 

  (2)

if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment;

 

RS-29


Table of Contents
  (3)

the spread adjustment (which may be a positive or negative value or zero) that has been selected by our designee, after consulting with us, or by us giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated floating-rate notes at such time.

“Benchmark Replacement Compounded SOFR” means the compounded average of Daily SOFR rates for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate being established by us or our designee, after consulting with us, in accordance with:

 

  (1)

the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining Benchmark Replacement Compounded SOFR; provided that:

 

  (2)

if, and to the extent that, we or our designee, after consulting with us, determines that Benchmark Replacement Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by us or our designee, after consulting with us, giving due consideration to any industry-accepted market practice for U.S. dollar-denominated floating-rate notes at such time.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, changes to (1) any interest determination date, interest payment date, interest period demarcation date, interest reset date, business day convention or interest period, (2) the manner, timing and frequency of determining rates and amounts of interest that are payable on the relevant notes and the conventions relating to such determination, (3) the timing and frequency of making payments of interest, (4) rounding conventions, (5) tenors, (6) any other terms or provisions of the relevant notes, in each case that we or our designee, after consulting with us, determines, from time to time, to be appropriate to reflect the determination and implementation of such Benchmark Replacement in a manner substantially consistent with market practice (or, if we, the calculation agent or our designee, after consulting with us, determines that implementation of any portion of such market practice is not administratively feasible or if we or our designee, after consulting with us, determines that no market practice for use of the Benchmark Replacement exists, in such other manner as we or our designee, after consulting with us, determines is appropriate).

“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

 

  (1)

in the case of clause (1) of the definition of “Benchmark Transition Event,” the relevant Reference Time in respect of any determination;

 

  (2)

in the case of clause (2) or (3) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or

 

  (3)

in the case of clause (4) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the

 

RS-30


Table of Contents

Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.

“Benchmark Replacement Term SOFR” with respect to USD LIBOR notes means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body. For the avoidance of doubt, this definition will not apply to term SOFR notes, with respect to which the definition of “term SOFR” contained under “— Determination of USD LIBOR, Daily SOFR and Term SOFR” above will govern and control.

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

 

  (1)

if the Benchmark is term SOFR, (a) the Relevant Governmental Body has not selected or recommended a forward-looking term rate for the tenor specified in the applicable pricing supplement based on SOFR, (b) the development of a forward-looking term rate for the tenor specified in the applicable pricing supplement based on SOFR that has been recommended or selected by the Relevant Governmental Body is not complete or (c) we, the calculation agent or our designee, after consulting with us, determines that the use of a forward-looking rate for the tenor specified in the applicable pricing supplement based on SOFR is not administratively feasible;

 

  (2)

a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;

 

  (3)

a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or

 

  (4)

a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.

“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current Benchmark.

“Interpolated Benchmark” with respect to the Benchmark for USD LIBOR notes and term SOFR notes means the rate determined for the Corresponding Tenor by interpolating on a linear basis between: (1) the Benchmark for the longest period (for which the Benchmark is available) that is shorter than the Corresponding Tenor and (2) the Benchmark for the shortest period (for which the Benchmark is available) that is longer than the Corresponding Tenor. “Benchmark” as used in clause (1) and (2) of the foregoing definition means the then-applicable Benchmark for the applicable periods specified in such clauses without giving effect to the applicable index maturity (if any).

 

RS-31


Table of Contents

“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.

“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.

“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.

“Reference Time” with respect to any determination of the Benchmark means (1) with respect to USD LIBOR notes, if the Benchmark is USD LIBOR, 11:00 a.m. (London time) on the relevant interest determination date, (2) with respect to term SOFR notes, the time determined by us or our designee after giving effect to the term SOFR conventions and (3) with respect to compounded SOFR notes, if the Benchmark is Daily SOFR, 3:00 p.m. (New York City time) on the date of such determination, and (4) otherwise, the time determined by us or our designee, after consulting with us, in accordance with the Benchmark Replacement Conforming Changes.

“Relevant Governmental Body” means the Federal Reserve and/or the FRBNY, or a committee officially endorsed or convened by the Federal Reserve and/or the FRBNY or any successor thereto.

“SOFR” in connection with implementation of the benchmark transition provisions with respect to USD LIBOR notes and term SOFR notes, and with respect to any day means the secured overnight financing rate published for such day by the SOFR Administrator on the SOFR Administrator’s Website. For the avoidance of doubt, this definition will not apply to compounded SOFR notes, with respect to which the definition of “Daily SOFR” will govern and control.

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

Business Day Conventions

If the applicable pricing supplement specifies that one of the following business day conventions is applicable to a note, the interest payment dates, interest reset dates, interest period demarcation dates (if applicable) and interest periods for that note will be affected and, consequently, may be adjusted as described below. Unless we specify otherwise in the applicable pricing supplement, any interest payment due at maturity or on a redemption date or repayment date will not be affected as described below.

 

   

“Following business day convention (adjusted)” means, if an interest payment date or interest period demarcation date (if applicable) would otherwise fall on a day that is not a business day (as described below), then such interest payment date or interest period demarcation date, as applicable, will be postponed to the next day that is a business day. Unless we specify otherwise in the applicable pricing supplement, the related interest reset dates and interest periods also will be adjusted for non-business days.

 

   

“Modified following business day convention (adjusted)” means, if an interest payment date or interest period demarcation date (if applicable) would otherwise fall on a day that is not a business day, then such interest payment date or interest period demarcation date, as applicable, will be postponed to the next day that is a business day,

 

RS-32


Table of Contents
 

except that, if the next succeeding business day falls in the next calendar month, then such interest payment date or interest period demarcation date, as applicable, will be advanced to the immediately preceding day that is a business day. In each case, unless we specify otherwise in the applicable pricing supplement, the related interest reset dates and interest periods also will be adjusted for non-business days.

 

   

“Following unadjusted business day convention” means, if an interest payment date falls on a day that is not a business day, any payment due on such interest payment date will be postponed to the next day that is a business day; provided that interest due with respect to such interest payment date will not accrue from, and including, such interest payment date to and including the date of payment of such interest as so postponed. Interest reset dates and interest periods also are not adjusted for non-business days under the following unadjusted business day convention.

 

   

“Modified following unadjusted business day convention” means, if an interest payment date falls on a day that is not a business day, any payment due on such interest payment date will be postponed to the next day that is a business day; provided that interest due with respect to such interest payment date will not accrue from, and including, such interest payment date to and including the date of payment of such interest as so postponed, and, provided further that, if such next succeeding business day would fall in the next succeeding calendar month, the date of payment with respect to such interest payment date will be advanced to the business day immediately preceding such interest payment date. Interest reset dates and interest periods also are not adjusted for non-business days under the modified following unadjusted business day convention.

 

   

“Preceding business day convention” means, if an interest payment date would otherwise fall on a day that is not a business day, then such interest payment date will be advanced to the immediately preceding day that is a business day. If the preceding business day convention is specified in the applicable pricing supplement to be “adjusted,” then the related interest reset dates and interest periods also will be adjusted for non-business days; however, if the preceding business day convention is specified in the applicable pricing supplement to be “unadjusted,” then the related interest reset dates and interest periods will not be adjusted for non-business days.

In all cases, unless we specify otherwise in the applicable pricing supplement, if the maturity date or any earlier redemption date or repayment date with respect to any note (other than a compounded SOFR note using the payment delay convention) falls on a day that is not a business day, any payment of principal and any premium, interest and other amounts otherwise due on such day, will be made on the next succeeding business day, and no interest on such payment will accrue for the period from and after such maturity date, redemption date or repayment date, as the case may be.

If no business day convention is specified in the applicable pricing supplement, then, with respect to any interest period during which the note bears interest at a fixed rate, the following unadjusted business day convention will apply, and, with respect to any interest period during which the note bears interest at a floating rate, the modified following business day convention (adjusted) will apply. We also may specify and describe a different business day convention from those described above in the applicable pricing supplement.

Unless we specify otherwise in the applicable pricing supplement, the term “business day” means, for any note, a day that meets all the following applicable requirements:

 

   

for all notes, is any weekday that is not a legal holiday in New York, New York, Charlotte, North Carolina, or any other place of payment of the note, and is not a date on which

 

RS-33


Table of Contents
 

banking institutions in those cities are authorized or required by law or regulation to be closed;

 

   

for any USD LIBOR note, also is a day on which commercial banks are open for business in London, England (a “London Banking Day”); and

 

   

for any compounded SOFR note, also is not a day on which the Securities Industry and Financial Markets Association recommends that the fixed income department of its members be closed for the entire day for purpose of trading in U.S. government securities (a “U.S. government securities business day”).

Calculation Agent; Decisions and Determinations

Calculations relating to a series of notes, including calculations with respect to base rates, interest rates, accrued interest, principal and any premium, and any other amounts payable applicable to such series of notes, as the case may be, will be made by the calculation agent. Unless otherwise specified in the applicable pricing supplement, any determination, decision or election that may be made by us or, in the case of a determination, the calculation agent or, in all cases, our other designee (which may be one of our affiliates) pursuant to the terms and provisions of the notes set forth in this base rates supplement (including the benchmark transition provisions set forth under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” and the term SOFR conventions) or in the applicable pricing supplement, and any decision to take or refrain from taking any action or any selection:

 

   

will be conclusive and binding absent manifest error;

 

   

will be made in our or the calculation agent’s or our other designee’s sole discretion, except if made by the calculation agent or our designee in connection with the benchmark transition provisions set forth under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” or the term SOFR conventions (and in the case of the calculation agent, any such determination will be limited solely to administrative feasibility as described in this base rates supplement);

 

   

if made by the calculation agent or our designee in connection with the benchmark transition provisions or term SOFR conventions (as described in the preceding bullet), will be made after consulting with us, and our designee will not make any such determination, decision or election to which we object; and

 

   

notwithstanding anything to the contrary in the applicable Indenture or the applicable series of notes, shall become effective without consent from the holders of the relevant series of notes or any other party.

If, with respect to any series of notes, we do not agree with any determination made by the calculation agent regarding administrative feasibility, as described in this base rates supplement, in connection with the benchmark transition provisions set forth under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date” or the term SOFR conventions, then we may, in our sole discretion, remove the calculation agent and appoint a successor calculation agent.

 

RS-34


Table of Contents

Any determination, decision or election pursuant to the benchmark transition provisions not made by our designee will be made by us on the basis as described above. The calculation agent shall have no liability for not making any such determination, decision or election in connection with the benchmark transition provisions. We may designate an entity (which entity may be a calculation agent and/or our affiliate) to make any determination, decision or election that we have the right to make in connection with the benchmark transition provisions set forth in this base rates supplement.

 

RS-35


Table of Contents

ADDITIONAL INFORMATION ABOUT SOFR

As further described in this base rates supplement, the interest rate on term SOFR notes, compounded SOFR notes and, in the circumstances described above under “— Effect of a Benchmark Transition Event and Related Benchmark Replacement Date,” the interest rate on USD LIBOR notes, will be determined by reference to a rate based on SOFR.

In general, the following discussion relating to SOFR is based on information available on the SOFR Administrator’s Website. SOFR is published by the FRBNY and is intended to be a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. FRBNY reports that SOFR includes all trades in the Broad General Collateral Rate, plus bilateral Treasury repurchase agreement (“repo”) transactions cleared through the delivery-versus-payment service offered by the Fixed Income Clearing Corporation (the “FICC”), a subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). SOFR is filtered by FRBNY to remove a portion of the foregoing transactions considered to be “specials.” According to FRBNY, “specials” are repos for specific-issue collateral which take place at cash-lending rates below those for general collateral repos because cash providers are willing to accept a lesser return on their cash in order to obtain a particular security.

FRBNY reports that SOFR is calculated as a volume-weighted median of transaction-level tri-party repo data collected from The Bank of New York Mellon, which currently acts as the clearing bank for the tri-party repo market, as well as General Collateral Finance Repo transaction data and data on bilateral U.S. Treasury repo transactions cleared through the FICC’s delivery-versus-payment service. FRBNY notes that it obtains information from DTCC Solutions LLC, an affiliate of DTCC.

If data for a given market segment were unavailable for any day, then the most recently available data for that segment would be utilized, with the rates on each transaction from that day adjusted to account for any change in the level of market rates in that segment over the intervening period. SOFR would be calculated from this adjusted prior day’s data for segments where current data were unavailable, and unadjusted data for any segments where data were available. To determine the change in the level of market rates over the intervening period for the missing market segment, the FRBNY would use information collected through a daily survey conducted by its trading desk of primary dealers’ repo borrowing activity. Such daily survey would include information reported by BofA Securities, Inc., our affiliate, as a primary dealer. On June 3, 2019, FRBNY used this daily survey mechanism to calculate SOFR for May 31, 2019, when access was disrupted to one of the three primary data sources used to calculate the SOFR.

FRBNY currently publishes SOFR daily on its website at https://apps.newyorkfed.org/markets/autorates/sofr. FRBNY states on its publication page for SOFR that use of SOFR is subject to important disclaimers, limitations and indemnification obligations, including that FRBNY may alter the methods of calculation, publication schedule, rate revision practices or availability of SOFR at any time without notice.

Each U.S. government securities business day, the FRBNY publishes SOFR on its website at approximately 8:00 a.m., New York City time. If errors are discovered in the transaction data provided by The Bank of New York Mellon or DTCC Solutions LLC, or in the calculation process, subsequent to the initial publication of SOFR but on that same day, SOFR and the accompanying summary statistics may be republished at approximately 2:30 p.m., New York City time. Additionally, if transaction data from The Bank of New York Mellon or DTCC Solutions LLC had previously not been available in time for publication, but became available later in the day, the affected rate or rates may be republished at around this time. Rate revisions will only be effected on the same day as initial publication and will only be republished if the change in the rate exceeds

 

RS-36


Table of Contents

one basis point. Any time a rate is revised, a footnote to the FRBNY’s publication would indicate the revision. This revision threshold will be reviewed periodically by the FRBNY and may be changed based on market conditions.

SOFR is published by FRBNY based on data received from other sources, and we have no control over its determination, calculation or publication.

FRBNY started publishing SOFR in April 2018. FRBNY also has published historical indicative Secured Overnight Financing Rates dating back to 2014, although such historical indicative data inherently involves assumptions, estimates and approximations. Investors should not rely on such historical indicative data or on any historical changes or trends in SOFR as an indicator of the future performance of SOFR.

Neither the SOFR Administrator’s Website, nor any of the information or materials available thereon, are incorporated by reference into this base rates supplement.

 

RS-37


Table of Contents

INDEX OF CERTAIN DEFINED TERMS

 

Defined Term

  Definition
Location
 

30/360

    RS-19  

Actual/360

    RS-19  

Actual/365 (Fixed)

    RS-19  

Actual/Actual

    RS-19  

adjusted

    RS-33  

ARRC

    RS-8  

Bank of America

    RS-3  

base rate

    RS-16  

Benchmark

    RS-28, RS-31  

Benchmark Replacement

    RS-28  

Benchmark Replacement Adjustment

    RS-29  

Benchmark Replacement Compounded SOFR

    RS-30  

Benchmark Replacement Conforming Changes

    RS-30  

Benchmark Replacement Date

    RS-30  

Benchmark Replacement Term SOFR

    RS-31  

Benchmark Transition Event

    RS-31  

benchmark transition provisions

    RS-28  

business day

    RS-33  

calculation date

    RS-20  

compounded SOFR

    RS-17  

compounded SOFR notes

    cover  

Corresponding Tenor

    RS-31  

Daily SOFR

    RS-26  

Designated LIBOR Page

    RS-26  

DTCC

    RS-36  

FICC

    RS-36  

Following business day convention (adjusted)

    RS-32  

Following unadjusted business day convention

    RS-33  

FRBNY

    RS-9  

index maturity

    RS-17  

interest determination date

    RS-20  

interest payment date

    RS-18, RS-22  

interest period

   
RS-18,
RS-21, RS-24
 
 

interest period demarcation dates

    RS-22  

Defined Term

  Definition
Location
 

interest reset date

    RS-20  

Interpolated Benchmark

    RS-31  

ISDA

    RS-10  

ISDA Definitions

    RS-32  

ISDA Fallback Adjustment

    RS-32  

ISDA Fallback Rate

    RS-32  

LIBOR

    RS-5  

London Banking Day

    RS-34  

Modified following business day convention (adjusted)

    RS-32  

Modified following unadjusted business day convention

    RS-33  

notes

   
cover, RS-19,
RS-21,  RS-23
 
 

observation period

    RS-24  

observation period convention

    RS-21  

payment delay convention

    RS-21  

Preceding business day convention

    RS-33  

rate cut-off date

    RS-22  

Reference Time

    RS-32  

Relevant Governmental Body

    RS-32  

repo

    RS-36  

Representative amount

    RS-26  

Reuters

    RS-26  

SOFR

    RS-8, RS-32  

SOFR Administrator

    RS-27  

SOFR Administrator’s Website

    RS-27  

SOFR notes

    RS-8  

specials

    RS-36  

spread

    RS-17  

spread multiplier

    RS-17  

term SOFR

    RS-27  

term SOFR administrator

    RS-27  

term SOFR conventions

    RS-28  

term SOFR notes

    cover  

U.S. government securities business day

    RS-34  

unadjusted

    RS-33  

Unadjusted Benchmark Replacement

    RS-32  

USD LIBOR

    RS-16, RS-25  

USD LIBOR notes

    cover  

 

 


Table of Contents

 

LOGO

Medium-Term Notes, Series N

We may offer from time to time our Bank of America Corporation Medium-Term Notes, Series N. The specific terms of any notes that we offer will be determined before each sale and will be described in a separate pricing supplement, prospectus addendum and/or other prospectus supplement (each, a “supplement”). Terms may include:

 

 

Priority: senior or subordinated

 

 

Interest rate: notes may bear interest at fixed or floating rates, or may not bear any interest

 

 

Maturity: 365 days (one year) or more

 

 

Payments: U.S. dollars or any other currency that we specify in the applicable supplement

 

Base floating rates of interest:

 

  ¡    

federal funds rate

 

  ¡    

LIBOR

 

  ¡    

EURIBOR

 

  ¡    

CDOR

 

  ¡    

prime rate

 

  ¡    

treasury rate

 

  ¡    

BBSW

 

  ¡    

any other rate we specify

 

 

We may sell notes to the selling agents as principal for resale at varying or fixed offering prices or through the selling agents as agents using their best efforts on our behalf. We also may sell the notes directly to investors.

We may use this prospectus supplement and the accompanying prospectus in the initial sale of any notes. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or any of our other broker-dealer affiliates, may use this prospectus supplement and the accompanying prospectus in market-making transactions in any notes after their initial sale. Unless we or one of our selling agents informs you otherwise in the confirmation of sale, this prospectus supplement and the accompanying prospectus are being used in a market-making transaction.

Unless otherwise specified in the applicable supplement, we do not intend to list the notes on any securities exchange.

Investing in the notes involves risks. See “Risk Factors” beginning on page S-5.

 

 

Our notes are unsecured and are not savings accounts, deposits, or other obligations of a bank. Our notes are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and involve investment risks.

None of the Securities and Exchange Commission, any state securities commission, or any other regulatory body has approved or disapproved of these notes or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

 

BofA Merrill Lynch

 

 

Prospectus Supplement to Prospectus dated June 29, 2018

June 29, 2018


Table of Contents

TABLE OF CONTENTS

 

     Page  

Prospectus Supplement

  

About this Prospectus Supplement

     S-3  

Risk Factors

     S-5  

Description of the Notes

     S-8  

General

     S-8  

Types of Notes

     S-8  

Payment of Principal, Interest, and Other Amounts Payable

     S-10  

Ranking

     S-14  

Redemption

     S-15  

Repayment

     S-15  

Reopenings

     S-15  

Extendible/Renewable Notes

     S-15  

Other Provisions

     S-15  

Repurchase

     S-16  

Form, Exchange, Registration, and Transfer of Notes

     S-16  

U.S. Federal Income Tax Considerations

     S-17  

Supplemental Plan of Distribution (Conflicts of Interest)

     S-18  

Selling Restrictions

     S-20  

Legal Matters

     S-31  
     Page  

Prospectus

  

About this Prospectus

     3  

Prospectus Summary

     4  

Risk Factors

     9  

Risks Relating to Regulation Resolution Strategies and Long-Term Debt Requirements 

     9  

Risks Relating to Debt Securities

     10  

Risks Related to Our Common Stock and Preferred Stock

     13  

Risks Relating to Certain Floating Rate Securities

     15  

Other Risks

     15  

Currency Risks

     16  

Bank of America Corporation

     20  

Use of Proceeds

     20  

Description of Debt Securities

     21  

General

     21  

Financial Consequences to Unsecured Debtholders of Single Point of Entry Resolution Strategy

     21  

The Indentures

     22  

Form and Denomination of Debt Securities

     23  

Different Series of Debt Securities

     24  

Fixed-Rate Notes

     26  

Floating-Rate Notes

     26  

Fixed/Floating-Rate Notes

     36  

Original Issue Discount Notes

     36  

Payment of Principal, Interest, and Other Amounts Payable

     36  

No Sinking Fund

     40  

Redemption

     40  

Repayment

     45  

Repurchase

     45  

Conversion

     45  

Exchange, Registration, and Transfer

     45  

Subordination

     46  

Sale or Issuance of Capital Stock of Banks

     47  

Limitation on Mergers and Sales of Assets

     48  

Waiver of Covenants

     48  

Modification of the Indentures

     48  

Meetings and Action by Securityholders

     49  

Events of Default and Rights of Acceleration; Covenant Breaches

     49  

Collection of Indebtedness and Suits for Enforcement by Trustee

     50  

Limitation on Suits

     51  

Payment of Additional Amounts

     51  

Redemption for Tax Reasons

     55  

Defeasance and Covenant Defeasance

     55  

Satisfaction and Discharge of the Indenture

     56  

Notices

     56  

Concerning the Trustees

     56  

Governing Law

     57  
     Page  

Description of Warrants

     58  

General

     58  

Description of Securities Warrants

     56  

Description of Index Warrants

     59  

Description of Currency Warrants

     59  

Modification

     60  

Enforceability of Rights of Warrantholders, No Trust Indenture Act Protection

     60  

Description of Purchase Contracts

     61  

General

     61  

Purchase Contract Property

     61  

Information in Supplement

     61  

Prepaid Purchase Contracts; Applicability of Indenture

     62  

Non-Prepaid Purchase Contracts; No Trust Indenture Act Protection

     63  

Pledge by Holders to Secure Performance

     63  

Settlement of Purchase Contracts that Are Part of Units

     63  

Failure of Holder to Perform Obligations

     64  

Description of Units

     65  

General

     65  

Unit Agreements: Prepaid, Non-Prepaid, and Other

     65  

Modification

     66  

Enforceability of Rights of Unitholders; No Trust Indenture Act Protection

     66  

Description of Preferred Stock

     67  

General

     67  

Dividends

     68  

Voting

     68  

Liquidation Preference

     68  

Preemptive Rights

     69  

Existing Preferred Stock

     69  

Additional Classes or Series of Stock

     106  

Description of Depositary Shares

     107  

General

     107  

Terms of the Depositary Shares

     107  

Withdrawal of Preferred Stock

     107  

Dividends and Other Distributions

     108  

Redemption of Depositary Shares

     108  

Voting the Deposited Preferred Stock

     108  

Amendment and Termination of the Deposit Agreement

     109  

Charges of Depository

     109  

Miscellaneous

     109  

Resignation and Removal of Depository

     109  

Description of Common Stock

     110  

General

     110  

Voting and Other Rights

     110  

Dividends

     110  

Certain Anti-Takeover Matters

     111  

Registration and Settlement

     112  

Book-Entry Only Issuance

     112  

Definitive Securities

     112  

Street Name Owners

     113  

Legal Holders

     113  

Special Considerations for Indirect Owners

     113  

Depositories for Global Securities

     114  

Special Considerations for Global Securities

     119  

U.S. Federal Income Tax Considerations

     122  

Taxation of Debt Securities

     123  

Taxation of Common Stock, Preferred Stock, and Depositary Shares

     138  

Taxation of Warrants

     143  

Taxation of Purchase Contracts

     143  

Taxation of Units

     143  

Reportable Transactions

     143  

Foreign Account Tax Compliance Act

     144  

Plan of Distribution (Conflicts of Interest)

     145  

Distribution Through Underwriters

     145  

Distribution Through Dealers

     146  

Distribution Through Agents

     146  

Direct Sales

     146  

General Information

     146  

Market-Making Transactions by Affiliates

     147  

Conflicts of Interest

     147  

ERISA Considerations

     149  

Where You Can Find More Information

     152  

Forward-Looking Statements

     153  

Legal Matters

     154  

Experts

     154  
 

 

S-2


Table of Contents

ABOUT THIS PROSPECTUS SUPPLEMENT

We have registered our Medium-Term Notes, Series N (the “notes”) on a registration statement on Form S-3 filed with the Securities and Exchange Commission under Registration No. 333-224523.

From time to time, we intend to use this prospectus supplement, the accompanying prospectus, and a related pricing supplement, prospectus addendum and/or other prospectus supplement to offer the notes. You should read each of these documents before investing in the notes.

This prospectus supplement describes additional terms of the notes and supplements the description of our debt securities that may be issued under the Indentures, including the notes, contained in the accompanying prospectus. If the information in this prospectus supplement is inconsistent with the accompanying prospectus, this prospectus supplement will supersede the information in the accompanying prospectus. If there are any differences between the information contained in the applicable pricing supplement or any document dated after the date of this prospectus supplement and incorporated by reference into the accompanying prospectus, the information contained in such later pricing supplement or document will supersede the information in this prospectus supplement.

This prospectus supplement and the accompanying prospectus do not constitute an offer to sell or the solicitation of an offer to buy the notes in any jurisdiction in which that offer or solicitation is unlawful. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes in some jurisdictions may be restricted by law. If you have received this prospectus supplement and the accompanying prospectus, you should find out about and observe these restrictions. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the distribution of this prospectus supplement and the accompanying prospectus and the offering of the notes outside of the United States. See “Supplemental Plan of Distribution (Conflicts of Interest).”

This prospectus supplement and the accompanying prospectus have been prepared on the basis that any offer of notes in any Member State of the European Economic Area (the “EEA”) which has implemented the Prospectus Directive (2003/71/EC) (and amendments thereto, including the Directive 2010/73/EU, to the extent implemented in the relevant Member State, the “Prospectus Directive”) (each, a “Relevant Member State”) will be made under an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of notes. Accordingly, any person making or intending to make an offer in that Relevant Member State of any notes which are contemplated in this prospectus supplement and the accompanying prospectus may only do so in circumstances in which no obligation arises for us or any of the selling agents to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither we nor the selling agents have authorized, and neither we nor they authorize, the making of any offer of notes in circumstances in which an obligation arises for us or any selling agent to publish or supplement a prospectus for the purposes of the Prospectus Directive in relation to such offer. Neither this prospectus supplement nor the accompanying prospectus constitutes an approved prospectus for the purposes of the Prospective Directive.

IMPORTANT  —  EEA RETAIL INVESTORS  —  The notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); (ii) a customer within the meaning of Directive 2002/92/EC, as amended,

 

S-3


Table of Contents

where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Directive. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

For each offering of notes, we will issue a pricing supplement, prospectus addendum and/or other prospectus supplement that will contain additional terms of the offering and a specific description of the notes being offered. A supplement also may add, update, or change information in this prospectus supplement or the accompanying prospectus, including provisions describing the calculation of the amounts payable under the notes and the method of making payments under the terms of a note. We will state in the applicable supplement the interest rate or interest rate basis or formula, issue price, the maturity date, interest payment dates, redemption, or repayment provisions, if any, and other relevant terms and conditions for each note at the time of issuance. A supplement also may include a discussion of any risk factors or other special additional considerations that apply to a particular type of note. Each applicable supplement can be quite detailed and always should be read carefully.

Unless we indicate otherwise or unless the context requires otherwise, all references in this prospectus supplement to “Bank of America,” “we,” “us,” “our,” or similar references are to Bank of America Corporation excluding its consolidated subsidiaries.

Any term that is used, but not defined, in this prospectus supplement has the meaning set forth in the accompanying prospectus.

 

S-4


Table of Contents

RISK FACTORS

Your investment in the notes involves significant risks. Your decision to purchase the notes should be made only after carefully considering the risks of an investment in the notes, including those discussed below, in the accompanying prospectus beginning on page 9, and in the relevant supplement(s) for the specific notes, with your advisors in light of your particular circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the notes or financial matters in general. For information regarding risks and uncertainties that may materially affect our business and results, please refer to the information under the captions “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017, which is incorporated by reference in the accompanying prospectus, as well as those risks and uncertainties discussed in our subsequent filings that are incorporated by reference in the accompanying prospectus. You also should review the risk factors that will be set forth in other documents that we will file after the date of this prospectus supplement.

Floating-rate notes bear additional risks.

If your notes bear interest at a floating rate, there will be additional significant risks not associated with a conventional fixed-rate note. These risks include fluctuation of the interest rates and the possibility that you will receive an amount of interest that is lower than expected. We have no control over a number of matters, including economic, financial, and political events, that are important in determining the existence, magnitude, and longevity of market volatility and other risks and their impact on the value of, or payments made on, your floating-rate notes. In recent years, interest rates have been volatile, and that volatility may be expected in the future.

Our hedging activities may affect your return at maturity and the market value of the notes.

At any time, we or our affiliates may engage in hedging activities relating to the notes. This hedging activity, in turn, may increase or decrease the market value of the notes. In addition, we or our affiliates may acquire a long or short position in the notes from time to time. All or a portion of these positions may be liquidated at or about the time of maturity of the notes. The aggregate amount and the composition of these positions are likely to vary over time. We have no reason to believe that any of our hedging activities will have a material effect on the notes, either directly or indirectly, by impacting the value of the notes. However, we cannot assure you that our activities or affiliates’ activities will not affect these values.

Our hedging and trading activities may create conflicts of interest with you.

From time to time during the term of each series of notes and in connection with the determination of the payments on the notes, we or our affiliates may enter into additional hedging transactions or adjust or close out existing hedging transactions. We or our affiliates also may enter into hedging transactions relating to other notes or instruments that we issue, some of which may have returns calculated in a manner related to that of a particular series of notes. We or our affiliates will price these hedging transactions with the intent to realize a profit, considering the risks inherent in these hedging activities, whether the value of the notes increases or decreases. However, these hedging activities may result in a profit that is more or less than initially expected, or could result in a loss.

We or one or more of our broker-dealer affiliates, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, may engage in trading activities that are not for your account or on your

 

S-5


Table of Contents

behalf. These trading activities may present a conflict of interest between your interest in the notes and the interests we and our affiliates may have in our proprietary accounts, in facilitating transactions, including block trades, for our other customers, and in accounts under our management. These trading activities could influence secondary trading (if any) in the notes, or otherwise could be adverse to your interests as a beneficial owner of the notes.

Additional Considerations Relating to LIBOR

Reforms to and uncertainty regarding LIBOR may adversely affect our business and/or the value of, return on and trading market for notes bearing a floating rate of interest based on LIBOR.

The U.K. Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit rates for LIBOR after 2021. This announcement, in conjunction with financial benchmark reforms more generally and changes in the interbank lending markets have resulted in uncertainty about the future of LIBOR and certain other rates or indices which are used as interest rate “benchmarks.” These actions and uncertainties may have the effect of triggering future changes in the rules or methodologies used to calculate benchmarks or lead to the discontinuance or unavailability of benchmarks. ICE Benchmark Administration is the administrator of LIBOR and maintains a reference panel of contributor banks, which includes Bank of America, N.A., London branch for certain LIBOR rates. Uncertainty as to the nature and effect of such reforms and actions, and the potential or actual discontinuance of benchmark quotes, may adversely affect the value of, return on and trading market for the notes and our other LIBOR-based securities or our financial condition or results of operations. Furthermore, there can be no assurances that we and other market participants will be adequately prepared for an actual discontinuation of benchmarks, including LIBOR, that may have an unpredictable impact on contractual mechanics (including, but not limited to, interest rates to be paid to or by us) and cause significant disruption to financial markets that are relevant to our business segments, among other adverse consequences, which may also result in adversely affecting our financial condition or results of operations.

For a series of notes bearing a floating rate of interest based on LIBOR, such interest rate may be calculated using alternative methods if LIBOR is no longer quoted and may be calculated using a different base rate if LIBOR is discontinued.

To the extent that LIBOR for the index currency and the index maturity designated in the applicable supplement is no longer quoted on the Designated LIBOR Page, such LIBOR will be determined using the alternative methods described in the accompanying prospectus under the heading “Description of Debt Securities — Floating Rate Notes — LIBOR Notes.” Any of these alternative methods may result in interest payments on LIBOR notes that are higher than, lower than or that do not otherwise correlate over time with the interest payments that would have been made on such notes if LIBOR was available in its current form. Further, the same reforms, actions, costs and/or risks that may lead to the discontinuation or unavailability of LIBOR may make one or more of the alternative methods impossible or impracticable to determine. If LIBOR is no longer quoted, or if LIBOR is discontinued and it is determined there is no substitute or successor base rate to LIBOR that is consistent with accepted market practice, the final alternative method for determining LIBOR with respect to any note is to use LIBOR as in effect for such note on the interest determination date on which it is determined that LIBOR has been discontinued, or, if LIBOR is not applicable to the such note on such interest determination date (for example because the note bears interest at a fixed rate on such interest determination date), to use the most recent rate that could have been determined by reference to the applicable Designated LIBOR Page, as described in the second paragraph in the section “Description of Debt Securities — Floating Rate Notes — LIBOR Notes” in the accompanying prospectus. In addition, if the calculation agent

 

S-6


Table of Contents

determines, in consultation with us, that LIBOR has been discontinued, then we will appoint in our sole discretion an investment bank of national standing, which may be our affiliate, to determine whether there is a substitute or successor base rate to three-month LIBOR that is consistent with accepted market practice. If we select one of our affiliates to assist in the determination of the substitute or successor rate, the interests of such entity may be adverse to your interests as a holder of the notes. Any of the foregoing may have an adverse effect on the value of, return on and trading market for the notes.

 

S-7


Table of Contents

DESCRIPTION OF THE NOTES

This section describes the general terms and conditions of the notes, which may be senior or subordinated medium-term notes. This section supplements, and should be read together with, the general description of our debt securities included in “Description of Debt Securities” in the accompanying prospectus. If there is any inconsistency between the information in this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

We will describe the particular terms of the notes we sell in a separate supplement. The terms and conditions stated in this section will apply to each note unless the note or the applicable supplement indicates otherwise.

General

In addition to the following summary of the general terms of the notes and the indentures, you should review the actual notes and the specific provisions of the 2018 Senior Indenture and the 2018 Subordinated Indenture, as applicable, which we have filed with the SEC as exhibits to the registration statement of which this prospectus supplement forms a part.

We will issue the notes as part of a series of debt securities under the 2018 Senior Indenture or the 2018 Subordinated Indenture, as applicable, which are contracts between us, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. In this prospectus supplement, we refer to The Bank of New York Mellon Trust Company, N.A., as the “trustee,” and we refer to the 2018 Senior Indenture and the 2018 Subordinated Indenture individually as an “Indenture” and together as the “Indentures.”

The Indentures are subject to, and governed by, the Trust Indenture Act of 1939.

We and the selling agents, in the ordinary course of our respective businesses, have conducted and may conduct business with the trustee or its affiliates. See “Description of Debt Securities — The Indentures” in the accompanying prospectus for more information about the Indentures and the functions of the trustee.

The notes are our direct unsecured obligations and are not obligations of our subsidiaries. The Indentures do not limit the amount of indebtedness that we may incur. We may issue other debt securities under the Indentures from time to time in one or more series up to the aggregate principal amount of the then-existing grant of authority by our board of directors.

Unless otherwise provided in the applicable supplement, the minimum denomination of the notes will be $1,000 and any larger amount that is a whole multiple of $1,000 (or the equivalent in other currencies).

Types of Notes

Fixed-Rate Notes.    We may issue notes that bear interest at a fixed rate described in the applicable supplement, which we refer to as “fixed-rate notes.” We also may issue fixed-rate notes that combine principal and interest payments in installment payments over the life of the note, which we refer to as “amortizing notes.” For more information on fixed-rate notes and amortizing notes, see “Description of Debt Securities — Fixed-Rate Notes” in the accompanying prospectus.

Floating-Rate Notes.    We may issue notes that bear interest at a floating rate of interest determined by reference to one or more base interest rates, or by reference to one or more interest

 

S-8


Table of Contents

rate formulae, described in the applicable supplement, which we refer to as “floating-rate notes.” In some cases, the interest rate of a floating-rate note also may be adjusted by adding or subtracting a spread or by multiplying the interest rate by a spread multiplier. A floating-rate note also may be subject to a maximum interest rate limit, or ceiling, and/or a minimum interest rate limit, or floor, on the interest that may accrue during any interest period. For more information on floating-rate notes, including a description of the manner in which interest payments will be calculated, see “Description of Debt Securities — Floating-Rate Notes” in the accompanying prospectus.

Fixed/Floating Rate Notes.    We may issue a debt security with elements of each of the fixed-rate and floating-rate notes described above. For example, a debt security may bear interest at a fixed rate for some periods and at a floating rate in others. We will describe the determination of interest for any of these debt securities in the applicable supplement.

Original Issue Discount Notes.    We may issue notes at a price lower than their principal amount or lower than their minimum guaranteed repayment amount at maturity, which we refer to as “original issue discount notes.” Original issue discount notes may be fixed-rate or floating-rate notes and may bear no interest (“zero coupon notes”) or may bear interest at a rate that is below market rates at the time of issuance. For more information on original issue discount notes, see “Description of Debt Securities — Original Issue Discount Notes” in the accompanying prospectus.

Specific Terms of the Notes.    The applicable supplement(s) for each offering of notes will contain additional terms of the offering and a specific description of those notes, including:

 

   

the specific designation of the notes;

 

   

the issue price;

 

   

the principal amount;

 

   

the issue date;

 

   

the maturity date, and any terms providing for the extension or postponement of the maturity date;

 

   

the denominations or minimum denominations, if other than $1,000;

 

   

the currency or currencies, if not U.S. dollars, in which payments will be made on the notes;

 

   

whether the note is a fixed-rate note or a floating-rate note;

 

   

whether the note is senior or subordinated;

 

   

the method of determining and paying interest, including any applicable interest rate basis or bases, any initial interest rate, or the method for determining any initial interest rate, any interest reset dates, any payment dates, any index maturity, and any maximum or minimum rate of interest, as applicable;

 

   

any spread or spread multiplier applicable to a floating-rate note;

 

   

the method for the calculation and payment of principal, premium (if any), interest, and other amounts payable (if any);

 

   

if other than the trustee, the identification of or method of selecting any calculation agents, exchange rate agents, or any other agents for the notes;

 

S-9


Table of Contents
   

if applicable, the circumstances under which the note may be redeemed at our option or repaid at your option prior to the maturity date set forth on the face of the note, including any repayment date, redemption commencement date, redemption price, and redemption period;

 

   

if applicable, the circumstances under which the maturity date set forth on the face of the note may be extended at our option or renewed at your option, including the extension or renewal periods and the final maturity date;

 

   

if applicable, any addition to, elimination of or other change in the events of default or covenants for the senior notes or remedies available to holders of the senior notes;

 

   

if the notes will be represented by a master global note;

 

   

if the notes will be listed on any stock exchange; and

 

   

if applicable, any other material terms of the note which are different from those described in this prospectus supplement and the accompanying prospectus.

Each note will mature on a business day (as defined in the accompanying prospectus) 365 days (one year) or more from the issue date. Unless we specify otherwise in the supplement, the record dates for any interest payments for book-entry only notes denominated in U.S. dollars will be one business day (in Charlotte, North Carolina and New York, New York) prior to the applicable payment date, and for any book-entry only notes denominated in a currency other than U.S. dollars will be the fifteenth calendar day preceding the applicable payment date.

Unless we specify otherwise in the applicable supplement, the notes will not be entitled to the benefit of any sinking fund.

Payment of Principal, Interest, and Other Amounts Payable

Paying Agents.    Unless otherwise provided in the applicable supplement, the trustee will act as our paying agent, security registrar, and transfer agent with respect to the notes through the trustee’s corporate trust office. That office is currently located at 10161 Centurion Parkway N., 2nd Floor, Jacksonville, Florida 32256. At any time, we may rescind the designation of a paying agent, appoint a successor or an additional paying agent or different paying agent, or approve a change in the office through which any paying agent acts in accordance with the applicable Indenture. In addition, we may decide to act as our own paying agent with respect to some or all of the notes, and the paying agent may resign.

Calculation Agents.    The trustee will act as the calculation agent for floating-rate notes, unless otherwise specified in the applicable supplement. The calculation agent also may be one of our affiliates. The calculation agent will be responsible for calculating the interest rate, base rates, principal, premium (if any), interest, or other amounts payable (if any) applicable to the floating-rate notes and for certain other related matters. The calculation agent, at the request of the holder of any floating-rate note, will provide the interest rate then in effect and, if already determined, the interest rate that is to take effect on the next interest reset date for the floating-rate note. We may appoint or replace any calculation agent or elect to act as the calculation agent from time to time for some or all of the notes, and the calculation agent may resign, without your consent and without notifying you of the change. Absent manifest error, all determinations of the calculation agent will be final and binding on you, the selling agents and us.

 

S-10


Table of Contents

Manner of Payment.    Unless otherwise stated in the applicable supplement, we will pay principal, premium (if any), interest, and other amounts payable (if any) on the notes in book-entry only form in accordance with arrangements then in place between the applicable paying agent and the applicable depository. Unless otherwise stated in the applicable supplement, we will pay any interest on notes in definitive form on each interest payment date other than the maturity date by, in our discretion, wire transfer of immediately available funds or check mailed to holders of the notes on the applicable record date at the address appearing on our or the security registrar’s records. Unless otherwise stated in the applicable supplement, we will pay any principal, premium (if any), interest, and other amounts payable (if any) at the maturity date of a note in definitive form by wire transfer of immediately available funds upon surrender of the note at the corporate trust office of the trustee or such other paying agent specified in the applicable supplement, as applicable.

Currency Conversions and Payments on Notes Denominated in Currencies Other than U.S. Dollars.    For any notes denominated or payable in a currency other than U.S. dollars (referred to as “non-U.S. dollar-denominated notes”), the initial investors will be required to pay for the notes in that foreign currency. The applicable selling agent may arrange for the conversion of U.S. dollars into the applicable foreign currency to facilitate payment for the non-U.S. dollar-denominated notes by U.S. purchasers desiring to make the initial payment in U.S. dollars. Any such conversion will be made by that selling agent on the terms and subject to the conditions, limitations, and charges as it may establish from time to time in accordance with its regular foreign exchange procedures, and subject to United States laws and regulations. All costs of any such conversion for the initial purchase of the non-U.S. dollar-denominated notes will be borne by the initial investors using those conversion arrangements.

We generally will pay principal and any premium, interest, and other amounts payable on non-U.S. dollar-denominated notes in the applicable foreign currency specified in the applicable supplement. However, unless we specify otherwise in the applicable supplement, holders of beneficial interests in notes through a participant in The Depository Trust Company, or “DTC,” will receive payments in U.S. dollars, unless they elect to receive payments on those notes in the applicable foreign currency. If a holder through DTC does not make an election through its DTC participant to receive payments in the applicable foreign currency, the exchange rate agent for the relevant non-U.S. dollar-denominated notes to be appointed by us will convert payments to that holder into U.S. dollars, and all costs of those conversions will be borne by that holder by deduction from the applicable payments.

The holder of a beneficial interest in global non-U.S. dollar-denominated notes held through a DTC participant may elect to receive payments on those notes in the foreign currency by notifying the DTC participant through which it holds its beneficial interests on or prior to the fifteenth business day prior to the record date for the applicable notes of (1) that holder’s election to receive all or a portion of the payment in the applicable foreign currency and (2) wire transfer instructions to an account for the applicable foreign currency outside the United States. DTC must be notified of the election and wire transfer instructions (a) on or prior to the fifth business day after the record date for any payment of interest and (b) on or prior to the tenth business day prior to the date for any payment of principal. DTC will notify the trustee or other applicable paying agent of the election and wire transfer instructions (1) on or prior to the fifth business day after the record date for any payment of interest and (2) on or prior to the tenth business day prior to the date for any payment of principal. If complete instructions are forwarded to and received by DTC through a DTC participant and forwarded by DTC to the trustee or other applicable paying agent and received on or prior to the dates described above, the holder will receive payment in the applicable foreign currency outside DTC; otherwise, only U.S. dollar payments will be made by the trustee or other applicable paying agent to DTC.

 

S-11


Table of Contents

For holders of non-U.S. dollar-denominated notes held through a DTC participant not electing payment in the applicable foreign currency, the U.S. dollar amount of any payment will be the amount of the applicable foreign currency otherwise payable, converted into U.S. dollars at the applicable exchange rate prevailing as of 11:00 A.M. (New York City time) on the second business day prior to the relevant payment date, less any costs incurred by the exchange rate agent for that conversion unless we specify otherwise in the applicable supplement. The costs of those conversions will be shared pro rata among the holders of beneficial interests in the applicable global notes receiving U.S. dollar payments in the proportion of their respective holdings. The exchange rate agent, to be appointed by us at the time of issuance for such non-U.S. dollar-denominated notes held through a DTC participant, will make those conversions in accordance with prevailing market practice and the terms of the applicable note and with any applicable arrangements between us and the exchange rate agent.

If an exchange rate quotation is unavailable from the entity or source ordinarily used by the exchange rate agent in the normal course of business, the exchange rate agent will obtain a quotation from a leading foreign exchange bank in New York City, which may be an affiliate of the exchange rate agent or another entity selected by the exchange rate agent for that purpose after consultation with us. If no quotation from a leading foreign exchange bank is available, payment will be made in the applicable foreign currency to the account or accounts specified by DTC to the trustee or other applicable paying agent, unless the applicable foreign currency is unavailable due to the imposition of exchange controls or other circumstances beyond our control.

If, at or about the time of payment of any principal, premium or interest on a non-U.S. dollar-denominated note, the relevant specified currency is not legal tender for the payment of public and private debts in the country issuing the currency as of the original issue date of such note, and the relevant specified currency has been replaced by another currency that has become legal tender for the payment of public and private debts in such country (a “replacement currency”), any amount payable pursuant such note may be paid, at our option, in the replacement currency or in U.S. dollars, at a rate of exchange which takes into account the conversion, at the rate prevailing on the most recent date on which official conversion rates were quoted or set by the national government or other authority responsible for issuing the replacement currency, from the specified currency to the replacement currency or to U.S. dollars, if applicable, and, if necessary, the conversion of the replacement currency into U.S. dollars at the rate prevailing on the date of such conversion. In this circumstance, we will appoint a financial institution to act as exchange rate agent for purposes of making the required conversions in accordance with prevailing market practice and the terms of the applicable note and with any applicable arrangements between us and the exchange rate agent.

Notwithstanding the foregoing, the relevant specified currency may not be available to us for making payments of principal of or any premium, interest or other amounts payable on any non-U.S. dollar-denominated notes. This could occur due to the imposition of exchange controls or other circumstances beyond our control, or if the specified currency is no longer used by the government of the country issuing that currency or by public institutions within the international banking community for the settlement of transactions. If the specified currency is unavailable and has not been replaced, and unless otherwise specified in the applicable supplement, we may satisfy our obligations to holders of the relevant non-U.S. dollar-denominated notes by making those payments due in the relevant specified currency on the date of payment in U.S. dollars. The amount of such payments made in U.S. dollars will be determined by an exchange rate agent to be appointed by us on the basis of the noon dollar buying rate in The City of New York for cable transfers of the specified currency or currencies in which a payment on any such non-U.S. dollar-denominated notes was to be made, published by the Federal Reserve Bank of New York, which is referred to as the “market exchange rate,” or such other rate as may be set forth in the applicable supplement. If that rate of exchange is not then available or is not published for a particular payment currency, the market exchange rate will be based on the highest bid quotation in The City of New York

 

S-12


Table of Contents

received by the exchange rate agent at approximately 11:00 a.m., New York City time, on the second business day preceding the applicable payment date from three recognized foreign exchange dealers for the purchase by the quoting dealer:

 

   

of the specified currency for U.S. dollars for settlement on the payment date;

 

   

in the aggregate amount of the specified currency payable to those holders or beneficial owners of non-U.S. dollar-denominated notes; and

 

   

at which the applicable dealer commits to execute a contract.

One of the dealers providing quotations may be the exchange rate agent unless the exchange rate agent is our affiliate. If those bid quotations are not available, the exchange rate agent will determine the market exchange rate at its sole discretion in accordance with prevailing market practice and the terms of the applicable note and with any applicable arrangements between us and the exchange rate agent.

The above provisions do not apply if a specified currency is unavailable because it has been replaced by the euro. If the euro has been substituted for a specified currency of the relevant non-U.S. dollar-denominated notes, we may, at our option, or will, if required by applicable law, without the consent of the holders of the affected notes, pay the principal of and any premium, interest, or other amounts payable on any non-U.S. dollar-denominated notes in euro instead of the specified currency, in conformity with legally applicable measures taken pursuant to, or by virtue of, the Treaty establishing the European Community, as amended. Any payment made in U.S. dollars or in euro as described above where the required payment is in an unavailable specified currency will not constitute an event of default under the relevant Indenture.

For purposes of the above discussion about currency conversions and payments on non-U.S. dollar-denominated notes, unless otherwise specified in the applicable supplement, the term “business day” means any weekday that is not a legal holiday in New York, New York or Charlotte, North Carolina and is not a day on which banking institutions in those cities are authorized or required by law or regulation to be closed.

For information regarding risks associated with securities denominated or payable in foreign currencies and exchange rates, see “Risk Factors — Currency Risks” in the accompanying prospectus.

Payment of Additional Amounts.    If we so specify in the applicable supplement, and subject to the exceptions and limitations set forth in the accompanying prospectus under “Description of Debt Securities — Payment of Additional Amounts,” we will pay to the beneficial holder of notes that is a “United States Alien” additional amounts to ensure that every net payment on such notes will not be less, due to the payment of U.S. withholding tax, than the amount then otherwise due and payable. For this purpose, a “net payment” on such notes means a payment by us or any paying agent, including payment of principal and interest, after deduction for any present or future tax, assessment, or other governmental charge of the United States (other than a territory or possession). These additional amounts will constitute additional interest on the note. For this purpose, U.S. withholding tax means a withholding tax of the United States, other than a territory or possession.

Except as specifically provided in the accompanying prospectus under “Description of Debt Securities — Payment of Additional Amounts,” we will not be required to make any payment of any tax, assessment, or other governmental charge imposed by any government, political subdivision, or taxing authority of that government.

 

S-13


Table of Contents

For purposes of determining whether the payment of additional amounts is required, the term “United States Alien” means any person who, for United States federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership to the extent that one or more of its members is, for United States federal income tax purposes, a foreign corporation, a non-resident alien individual, or a non-resident alien fiduciary of a foreign estate or trust.

If we so specify in the applicable supplement, we may redeem the notes, in whole but not in part, at any time before maturity if we have or will become obligated to pay additional amounts as a result of a change in, or an amendment to, United States tax laws or regulations, as described in the accompanying prospectus under “Description of the Debt Securities — Redemption for Tax Reasons,” subject to any required approvals as described below under “— Redemption.”

For more information about payment procedures, including payments in a currency other than U.S. dollars, see “Description of Debt Securities — Payment of Principal, Interest, and Other Amounts Payable” in the accompanying prospectus.

Ranking

Because we are a holding company, our right to participate in any distribution of assets of any subsidiary upon such subsidiary’s liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent we may ourselves be recognized as a creditor of that subsidiary. Accordingly, our obligations under senior notes or subordinated notes will be structurally subordinated to all existing and future liabilities of our subsidiaries, and claimants should look only to our assets for payments. In addition, the senior notes and the subordinated notes will be unsecured and therefore in a bankruptcy or similar proceeding will effectively rank junior to our secured obligations to the extent of the value of the assets securing such obligations. See “Risk Factors — Risks Relating to Debt Securities” in the accompanying prospectus.

Senior Notes.    The senior notes will be unsecured and will rank equally in right of payment with all our other unsecured and unsubordinated obligations from time to time outstanding, except obligations, including deposit liabilities, that are subject to any priorities or preferences by law.

The 2018 Senior Indenture and the senior notes do not contain any limitation on the amount of obligations that we may incur in the future.

Subordinated Notes.    Our indebtedness evidenced by the subordinated notes, including the principal, premium (if any), interest, and other amounts payable (if any), will be unsecured and will be subordinate and junior in right of payment to all of our senior indebtedness from time to time outstanding to the extent and in the manner provided in the 2018 Subordinated Indenture. The subordinated notes will rank equally in right of payment with all our other unsecured and subordinated indebtedness, other than unsecured and subordinated indebtedness that by its terms is subordinated to the subordinated notes. Due to differing subordination provisions in various series of subordinated debt securities issued by us and our predecessors, in the event of a dissolution, winding up, liquidation, reorganization, insolvency, receivership or other proceeding, holders of subordinated notes may receive more or less, ratably, than holders of some other series of our outstanding subordinated debt securities. Payment of principal of our subordinated indebtedness, including any subordinated notes, may not be accelerated if there is a default in the payment of amounts payable under, or a default in any of our other covenants applicable to, our subordinated indebtedness.

 

S-14


Table of Contents

The 2018 Subordinated Indenture and the subordinated notes do not contain any limitation on the amount of obligations ranking senior to the subordinated notes, or the amount of obligations ranking equally with the subordinated notes, that we may incur in the future.

Unless we specify otherwise in the applicable supplement, the subordinated notes will not be guaranteed by us or any of our affiliates and will not be subject to any other arrangement that legally or economically enhances the ranking of the subordinated notes. For more information about our subordinated notes, see “Description of Debt Securities — Subordination” in the accompanying prospectus.

Redemption

The applicable supplement will indicate whether we have the option to redeem notes prior to their stated maturity. If we may redeem the notes prior to their stated maturity, the applicable supplement will indicate the redemption price and method for redemption. See also “Description of Debt Securities — Redemption” in the accompanying prospectus. The redemption of any note that is our eligible LTD will require the prior approval of the Federal Reserve Board if after such redemption we would fail to satisfy our requirements as to eligible LTD or total loss-absorbing capacity under the TLAC Rules. In addition, unless we specify otherwise in the applicable supplement, to the extent then required by applicable laws or regulations, the subordinated notes may not be redeemed prior to their stated maturity without the requisite prior approvals, if any, from applicable regulators.

Repayment

The applicable supplement will indicate whether the notes can be repaid at the holder’s option prior to their stated maturity. If the notes may be repaid prior to their stated maturity, the applicable supplement will indicate the amount at which we will repay the notes and the procedure for repayment. Unless we specify otherwise in the applicable supplement, to the extent then required by applicable laws or regulations, the subordinated notes may not be repaid prior to their stated maturity without the requisite prior approvals, if any, from applicable regulators.

Reopenings

We have the ability to “reopen,” or increase after the issuance date, the principal amount of a particular tranche or series of our notes without notice to the holders of existing notes by selling additional notes having the same terms, provided that such additional notes shall be fungible for U.S. federal income tax purposes. However, any new notes of this kind may have a different offering price and may begin to bear interest at a different date.

Extendible/Renewable Notes

We may issue notes for which the maturity date may be extended at our option or renewed at the option of the holder for one or more specified periods, up to but not beyond the final maturity date stated in the note. The specific terms of and any additional considerations relating to extendible or renewable notes will be set forth in the applicable supplement.

Other Provisions

Any provisions with respect to the determination of an interest rate basis, the specification of interest rate basis, the calculation of the applicable interest rate, the amounts payable at maturity, interest payment dates, or any other related matters for a particular tranche of notes, may be modified as described in the applicable supplement.

 

S-15


Table of Contents

Repurchase

We, or our affiliates, may purchase at any time our notes by tender, in the open market at prevailing prices or in private transactions at negotiated prices. If we purchase notes in this manner, we have the discretion to hold, resell, or cancel any repurchased notes. The repurchase of any note that is our eligible LTD will require the prior approval of the Federal Reserve Board if after such repurchase we would fail to satisfy our requirements as to eligible LTD or total loss-absorbing capacity under the TLAC Rules. Unless we specify otherwise in the applicable supplement, to the extent then required by applicable laws or regulations, the subordinated notes may not be repurchased prior to their stated maturity without the requisite prior approvals, if any, from applicable regulators.

Form, Exchange, Registration, and Transfer of Notes

If we specify in the applicable supplement, your notes will be represented by a kind of global note that we refer to as a master global note. This kind of global note represents multiple notes that have different terms and are issued at different times. Each note evidenced by a master note will be identified by the trustee on a schedule to the master note. If we do not specify in the applicable supplement that your notes will be represented by a master global note, then the notes represented by the same global note will have the same terms.

We will issue each note in book-entry only form. This means that we will not issue certificated notes in definitive form to each beneficial owner. Instead, the notes will be in the form of a global note or a master global note, in fully registered form, registered and held in the name of the applicable depository or a nominee of that depository. For notes denominated in a currency other than U.S. dollars, the notes may be issued in the form of two global notes, each in fully registered form, one of which will be deposited with DTC, or its custodian, and one of which will be deposited with a common depository for Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking, société anonyme, Luxembourg (“Clearstream”). Notes denominated in Canadian dollars may be issued as one or more registered global notes initially registered in the name of CDS & CO., as nominee for CDS Clearing and Depository Services Inc. (“CDS”), and deposited with CDS. Unless we specify otherwise in the applicable supplement, the depository for the notes will be DTC. DTC, CDS, Euroclear, and Clearstream, as depositories for global securities, and some of their policies and procedures, are described under “Registration and Settlement — Depositories for Global Securities” in the accompanying prospectus. For more information about book-entry only notes and the procedures for registration, settlement, exchange, and transfer of book-entry only notes, see “Description of Debt Securities — Form and Denomination of Debt Securities” and “Registration and Settlement” in the accompanying prospectus.

If we ever issue notes in definitive form, unless we specify otherwise in the applicable supplement, those notes will be in registered form, and the exchange, registration, or transfer of those notes will be governed by the applicable Indenture and the procedures described under “Description of Debt Securities — Exchange, Registration, and Transfer” in the accompanying prospectus.

 

S-16


Table of Contents

U.S. FEDERAL INCOME TAX CONSIDERATIONS

For the material U.S. federal income tax considerations of the acquisition, ownership and disposition of certain notes, see “U.S. Federal Income Tax Considerations” on page 122 of the accompanying prospectus and the subsection “Taxation of Debt Securities” of that section. Special U.S. federal income tax rules are applicable to certain types of notes we may issue under this prospectus supplement. The material U.S. federal income tax considerations with respect to any notes we issue, and which are not addressed in the accompanying prospectus, will be discussed in the applicable supplement.

You should consult with your own tax advisor before investing in the notes.

 

S-17


Table of Contents

SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)

We are offering the notes for sale on a continuing basis through the selling agents. The selling agents may act either on a principal basis or on an agency basis. We may offer the notes at varying prices relating to prevailing market prices at the time of resale, as determined by the selling agents, or, if so specified in the applicable supplement, for resale at a fixed public offering price. The applicable supplement will set forth the initial price for the notes, or whether they will be sold at varying prices.

If we sell notes on an agency basis, we will pay a commission to the selling agent to be negotiated at the time of sale. The commission will be determined at the time of sale and will be specified in the applicable supplement. Each selling agent will use its reasonable best efforts when we request it to solicit purchases of the notes as our agent.

Unless otherwise agreed and specified in the applicable supplement, if notes are sold to a selling agent acting as principal, for its own account, or for resale to one or more investors or other purchasers, including other broker-dealers, then any notes so sold will be purchased by that selling agent at a price equal to 100% of the principal amount of the notes less a commission that will be a percentage of the principal amount determined as described above. Notes sold in this manner may be resold by the selling agent to investors and other purchasers from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale, or the notes may be resold to other dealers for resale to investors. The selling agents may allow any portion of the discount received in connection with the purchase from us to the dealers, but the discount allowed to any dealer will not be in excess of the discount to be received by the selling agent from us. After the initial public offering of notes, the selling agent may change the public offering price or the discount allowed to dealers.

We also may sell notes directly to investors, without the involvement of any selling agent. In this case, we would not be obligated to pay any commission or discount in connection with the sale, and we would receive 100% of the principal amount of the notes so sold, unless otherwise specified in the applicable supplement.

We will name any selling agents or other persons through which we sell any notes, as well as any commissions or discounts payable to those selling agents or other persons, in the applicable supplement. As of the date of this prospectus supplement, our selling agent is Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”). We will enter into a distribution agreement with MLPF&S that describes the offering of notes by them as our agent and as our principal. The distribution agreement will be filed as an exhibit to the registration statement of which this prospectus supplement forms a part. We also may accept offers to purchase notes through additional selling agents on substantially the same terms and conditions, including commissions, as would apply to purchases through MLPF&S under the distribution agreement. MLPF&S may assign its rights under the distribution agreement to another one of our broker-dealer affiliates under the circumstances set forth in the distribution agreement. If a selling agent purchases notes as principal, that selling agent usually will be required to enter into a separate purchase agreement for the notes, and may be referred to in that purchase agreement and the applicable supplement, along with any other selling agents, as an “underwriter.”

We have the right to withdraw, cancel, or modify the offer made by this prospectus supplement without notice. We will have the sole right to accept offers to purchase notes, and we, in our absolute discretion, may reject any proposed purchase of notes in whole or in part. Each selling agent will have the right, in its reasonable discretion, to reject in whole or in part any proposed purchase of notes through that selling agent.

 

S-18


Table of Contents

Any selling agent participating in the distribution of the notes may be considered to be an underwriter, as that term is defined in the Securities Act. We have agreed to indemnify each selling agent and certain other persons against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the selling agents may be required to make. We also have agreed to reimburse the selling agents for certain expenses.

The notes will not have an established trading market when issued, and we do not intend to list the notes on any securities exchange, unless otherwise specified in the applicable supplement. Any selling agent may purchase and sell notes in the secondary market from time to time. However, no selling agent is obligated to do so, and any selling agent may discontinue making a market in the notes at any time without notice. There is no assurance that there will be a secondary market for any of the notes.

To facilitate offerings of the notes by a selling agent that purchases notes as principal, and in accordance with industry practice, selling agents may engage in transactions that stabilize, maintain, or otherwise affect the market price of the notes. Those transactions may include overallotment, entering stabilizing bids, effecting syndicate-covering transactions, and imposing penalty bids to reclaim selling concessions allowed to a member of the syndicate or to a dealer, as follows:

 

   

An overallotment in connection with an offering creates a short position in the offered securities for the selling agent’s own account.

 

   

A selling agent may place a stabilizing bid to purchase a note for the purpose of pegging, fixing, or maintaining the price of that note.

 

   

Selling agents may engage in syndicate-covering transactions to cover overallotments or to stabilize the price of the notes by bidding for, and purchasing, the notes or any other securities in the open market in order to reduce a short position created in connection with the offering.

 

   

The selling agent that serves as syndicate manager may impose a penalty bid on a syndicate member to reclaim a selling concession in connection with an offering when offered securities originally sold by the syndicate member are purchased in syndicate-covering transactions, in stabilization transactions, or otherwise.

Any of these activities may stabilize or maintain the market price of the securities above independent market levels. The selling agents are not required to engage in these activities, and may end any of these activities at any time.

MLPF&S, a selling agent and one of our affiliates, is a broker-dealer and member of the Financial Industry Regulatory Authority, Inc., or “FINRA.” Each initial offering and any remarketing of notes involving any of our broker-dealer affiliates, including MLPF&S, will be conducted in compliance with the requirements of FINRA Rule 5121 regarding a FINRA member firm’s offer and sale of securities of an affiliate. None of our broker-dealer affiliates that is a FINRA member will execute a transaction in the notes in a discretionary account without specific prior written approval of the customer, see “Plan of Distribution (Conflicts of Interest)–Conflicts of Interest” in the accompanying prospectus.

Following the initial distribution of any notes, our broker-dealer affiliates, including MLPF&S, may buy and sell the notes in market-making transactions as part of their business as a broker-dealer. Resales of this kind may occur in the open market or may be privately negotiated at prevailing market prices at the time of sale. Notes may be sold in connection with a remarketing

 

S-19


Table of Contents

after their purchase by one or more firms. Any of our affiliates may act as principal or agent in these transactions.

This prospectus supplement may be used by one or more of our affiliates in connection with offers and sales related to market-making transactions in the notes, including block positioning and block trades, to the extent permitted by applicable law. Any of our affiliates may act as principal or agent in these transactions.

Notes sold in market-making transactions include notes issued after the date of this prospectus supplement as well as previously-issued securities. Information about the trade and settlement dates, as well as the purchase price, for a market-making transaction will be provided to the purchaser in a separate confirmation of sale. Unless we or one of our selling agents informs you in the confirmation of sale that notes are being purchased in an original offering and sale, you may assume that you are purchasing the notes in a market-making transaction.

MLPF&S and other selling agents that we may name in the future, or their affiliates, have engaged, and may in the future engage, in investment banking, commercial banking, and financial advisory transactions with us and our affiliates. These transactions are in the ordinary course of business for the selling agents and us and our respective affiliates. In these transactions, the selling agents or their affiliates receive customary fees and expenses.

In the applicable supplement, we will specify the settlement period for the offered notes. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, if we specify a longer settlement cycle in the applicable supplement for an offering of notes, purchasers who wish to trade those notes on any date prior to two business days before delivery of the notes, will be required to specify an alternative settlement cycle at the time of the trade to prevent a failed settlement and should consult their own advisors in connection with that election.

Selling Restrictions

General.    Each of the selling agents, severally and not jointly, has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that it has not and will not offer, sell, or deliver any note, directly or indirectly, or distribute this prospectus supplement or the accompanying prospectus, or any other offering material relating to any of the notes, in any jurisdiction except under circumstances that will result in compliance with applicable laws and regulations and that will not impose any obligations on us except as set forth in the distribution agreement.

Argentina.    We have not made, and will not make, any application to obtain an authorization from the Comisión Nacional de Valores (the “CNV”) for the public offering of the notes in Argentina. The CNV has not approved the terms and conditions of the notes, their issuance or offering, this prospectus supplement or the accompanying prospectus, or any other document relating to the offering or issuance of the notes. The selling agents have represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that it has not offered or sold, and will not offer or sell, any of the notes in Argentina, except in transactions that will not constitute a public offering of securities within the meaning of Sections 2 and 83 of the Argentine Capital Markets Law No. 26,831. Argentine insurance companies may not purchase the notes.

 

S-20


Table of Contents

Australia.    No prospectus or other disclosure document (as defined in the Corporations Act of 2001 (Cth) of Australia (the “Corporations Act”)) in relation to the program or any notes has been, or will be, lodged with the Australian Securities and Investments Commission or the Australian Securities Exchange operated by ASX Limited. Each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that in connection with the distribution of the notes, that it:

 

  (a)

has not distributed or published, and will not distribute or publish, this prospectus supplement or the accompanying prospectus or any other offering material or advertisement relating to any Notes in Australia; and

 

  (b)

must not make, directly or indirectly, any offer or invitation in Australia or which is received in Australia in relation to the issue, sale or purchase of any notes,

unless

 

  (i)

the offeree or invitee is required to pay at least A$500,000 in aggregate consideration for the notes or its foreign currency equivalent (in either case disregarding amounts, if any, lent by us or any other person offering the notes or its associates (within the meaning of those expressions in Part 6D.2 of the Corporations Act), or it is otherwise an offer or invitation in respect of which, by virtue of section 708 or Part 7.9 of the Corporations Act, no disclosure is required to be given to the offeree or invitee;

 

  (ii)

the offer or invitation does not constitute an offer to a “retail client” as defined for the purposes of section 761G of the Australian Corporations Act; and

 

  (iii)

such action complies with any applicable laws and directives in Australia.

We are not authorized under the Banking Act 1959 of the Commonwealth of Australia (the “Australian Banking Act”) to carry on banking business and are not subject to prudential supervision by the Australian Prudential Regulation Authority. The notes are not Deposit Liabilities under the Australian Banking Act. We do not hold an Australian Financial Services License under Chapter 7 of the Corporations Act.

Austria.    The notes may only be offered in the Republic of Austria in accordance with the Austrian Capital Market Act, implementing in particular Directive 2003/71/EC (as amended, the “Prospectus Directive”), and any other laws and regulations applicable in the Republic of Austria governing the issue, offer and sale of securities in the Republic of Austria. The notes are not registered or otherwise authorized for public offer within the meaning or under the Austrian Capital Market Act or any other applicable laws and regulations in Austria. The recipients of this prospectus supplement, the accompanying prospectus and any other selling materials in respect to the notes are qualified investors within the meaning of the Austrian Capital Market Act. Accordingly, the notes may not be, and are not being issued, offered, sold or advertised publicly or offered similarly under either the Austrian Capital Market Act or any other relevant legislation in Austria. We are a U.S. bank holding company and a financial holding company. We are not a bank under the Austrian Banking Act (Bankwesengesetz) and are not EU passported to perform banking business in Austria.

Bermuda.    The notes may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including companies) may not carry on or engage in any trade or business in Bermuda (which could include the offering of the notes in Bermuda) unless such persons are licensed under applicable Bermuda legislation.

 

S-21


Table of Contents

Brazil.    The information contained in this prospectus supplement or in the accompanying prospectus does not constitute a public offering or distribution of securities in Brazil and no registration or filing with respect to any securities or financial products described in these documents has been made with the Comissão de Valores Mobiliários (the “CVM”). No public offer of securities or financial products described in this prospectus supplement or in the accompanying prospectus should be made in Brazil without the applicable registration at the CVM.

Canada.    Each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that in connection with the distribution of the notes it will sell the notes from outside Canada solely to purchasers purchasing as principal that are both “accredited investors” as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario) and “permitted clients” as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

Cayman Islands.    The notes may not be offered to the public in the Cayman Islands.

Chile.    The notes have not been registered with the Superintendencia de Valores y Seguros in Chile and may not be offered or sold publicly in Chile.

The People’s Republic of China.    Each selling agent has represented, warranted and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that, other than to the qualified individuals or entities in the People’s Republic of China (excluding the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan) (“PRC”) which have been approved by the relevant PRC government authorities (including, but not limited to, the People’s Bank of China, the China Bank and Insurance Regulatory Commission, the China Securities Regulatory Commission, and/or the State Administration of Foreign Exchange) to subscribe for and purchase the notes:

 

  (a)

neither this prospectus supplement and the accompanying prospectus nor any advertisement or other offering material or information in connection with the notes has been and will be registered, circulated, published or distributed in the PRC;

 

  (b)

the notes shall not be offered or sold, and will not be offered or sold to any investor for re-offering or resale, directly or indirectly, to any investor in the PRC, except in accordance with applicable PRC laws and regulations; and

 

  (c)

there is no cross-border communication in any form from us or any selling agent to solicit, advertise, promote or market the sales of notes from outside the PRC to any investor in the PRC, or on issuing or trading of the notes hereunder.

The prospective investors in the PRC are responsible for obtaining all relevant government regulatory licences, approvals, verifications and/or registrations themselves, including, but not limited to, any which may be required by the relevant PRC government authorities (including, but not limited to, the People’s Bank of China, the China Bank and Insurance Regulatory Commission, the China Securities Regulatory Commission, and/or the State Administration of Foreign Exchange), and complying with all relevant PRC laws and regulations (including, but not limited to, all relevant securities laws and regulations, foreign exchange regulations and/or foreign investment regulations) at all times.

Prohibition of Sales to EEA Retail Investors.    Each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that it has not offered, sold or otherwise made available and will not offer, sell

 

S-22


Table of Contents

or otherwise make available any notes which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus in relation thereto to any retail investor in the European Economic Area. For the purposes of this provision:

 

  (a)

the expression “retail investor” means a person who is one (or more) of the following:

 

  (i)

a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU on markets in financial instruments (as amended, “MiFID II”); or

 

  (ii)

a customer within the meaning of Directive 2002/92/EC (as amended), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or

 

  (iii)

not a qualified investor as defined in Directive 2003/71/EC, as amended; and

 

  (b)

the expression an “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes.

France.    This prospectus supplement and accompanying prospectus have not been approved by the Autorité des marchés financiers (“AMF”).

Each of the selling agents has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that it has not offered or sold and will not offer or sell, directly or indirectly, the notes to the public in France, and has not distributed or caused to be distributed and will not distribute or cause to be distributed to the public in France this prospectus supplement, the accompanying prospectus or any other offering material relating to the notes, and that such offers, sales and distributions have been and will be made in France only to (a) providers of the investment service of portfolio management for the account of third parties, (b) qualified investors (investisseurs qualifiés), acting for their own account, (c) a restricted group of investors (cercle restreint d’investisseurs) acting for their own account and/or (d) other investors in circumstances which do not require the publication by the offeror of a prospectus pursuant to the French Code monétaire et financier and the Règlement général of the AMF all as defined in, and in accordance with, Articles L.411-2, D.411-1, D.411-4, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier and other applicable regulations. The direct or indirect resale of the notes to the public in France may be made only as provided by, and in accordance with, Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Code monétaire et financier.

Hong Kong.    In relation to each tranche of notes that we issue, each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that:

 

  (a)

it has not offered or sold and will not offer or sell in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), by means of any document, any notes except for notes which are a “structured product” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) other than (i) to “professional investors” as defined in the SFO and any rules made under the SFO; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the “CWUMPO”) or which do not constitute an offer to the public within the meaning of the CWUMPO; and

 

S-23


Table of Contents
  (b)

it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation, or document relating to the notes, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the notes that are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.

Indonesia.    The notes offered do not constitute a public offering under the Indonesian Capital Market Law and its implementing regulations (Law No. 8/1995). The notes under this prospectus supplement and accompanying prospectus may not be offered or sold, directly or indirectly, within Indonesia territory or to Indonesian citizens (wherever they are domiciled or located), entities or residents in a manner which constitutes a public offering of the notes under the laws and regulations of Indonesia, including but not limited to the Law No. 8/1995 as amended or replaced from time to time. The Indonesian Financial Services Authority (OJK) does not review or declare its approval or disapproval on the issuance of the notes, nor does it make any determination as to the accuracy or adequacy of this prospectus supplement and the accompanying prospectus.

Likewise, the notes and this prospectus supplement and accompanying prospectus are not authorized by the Central Bank (Bank Indonesia) for their distribution through banking institutions in Indonesia.

Due to the complexity of the notes offered, the notes may not be suitable for certain investors. Investors who intend to buy the notes should consult with their financial advisors, brokers or other financial experts before making any decision to buy the notes.

Israel.    This prospectus supplement and the accompanying prospectus are intended solely for investors listed in the First Supplement of the Israeli Securities Law of 1968, as amended. A prospectus has not been prepared or filed, and will not be prepared or filed, in Israel relating to the notes offered hereunder. The notes cannot be resold in Israel other than to investors listed in the First Supplement of the Israeli Securities Law of 1968, as amended.

No action will be taken in Israel that would permit an offering of the notes or the distribution of any offering document or any other material to the public in Israel. In particular, no offering document or other material has been reviewed or approved by the Israel Securities Authority. Any material provided to an offeree in Israel may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have been provided directly by us or the selling agents.

Nothing in this prospectus supplement, the accompanying prospectus or any other offering material relating to the notes, should be considered as the rendering of a recommendation or advice, including investment advice or investment marketing under the Law For Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management, 1995, to purchase any note. The purchase of any note will be based on an investor’s own understanding, for the investor’s own benefit and for the investor’s own account and not with the aim or intention of distributing or offering to other parties. In purchasing the notes, each investor declares that it has the knowledge, expertise and experience in financial and business matters so as to be capable of evaluating the risks and merits of an investment in the notes, without relying on any of the materials provided.

Italy.    The offering of the notes has not been registered with CONSOB–Commissione Nazionale per le Società e la Borsa (the Italian Companies and Exchange Commission) pursuant to Italian securities legislation and, accordingly, no such notes may be offered, sold or delivered, nor

 

S-24


Table of Contents

may copies of this prospectus supplement or the accompanying prospectus or of any other document relating to the notes be distributed in the Republic of Italy except:

 

  (a)

to qualified investors (investitori qualificati), as defined in Article 34-ter, first paragraph, letter (b), of CONSOB Regulation No. 11971 of May 14, 1999, as amended (“CONSOB Regulation No. 11971”), pursuant to Article 100 of Legislative Decree No. 58 of February 24, 1998, as amended (the “Italian Financial Services Act”); or

 

  (b)

in other circumstances which are expressly exempted from the rules on offerings of securities to the public (offerta al pubblico di prodotti finanziari) pursuant to Article 100 of the Italian Financial Services Act and Article 34-ter, first paragraph, of CONSOB Regulation No. 11971.

In addition and without prejudice to the foregoing, any offer, sale or delivery of the notes or distribution of copies of this prospectus supplement and the accompanying prospectus or any other document relating to such notes in the Republic of Italy under (a) or (b) above must be:

 

  (a)

made by an investment firm, bank or financial intermediary authorized to conduct such activities in the Republic of Italy in accordance with the Italian Financial Services Act, Legislative Decree No. 385 of September 1, 1993, as amended (the “Consolidated Banking Act”), and Regulation No. 16190 of October 29, 2007 (as amended from time to time);

 

  (b)

in compliance with Article 129 of Consolidated Banking Act, as amended, and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may require the issuer or any entity offering the notes to provide data and information on the issue or the offer of the notes in the Republic of Italy; and

 

  (c)

in compliance with any other applicable laws and regulations, as well as with any regulations or requirements imposed by CONSOB, the Bank of Italy or other Italian authority.

Please note that in accordance with Article 100-bis of the Financial Services Act, concerning the circulation of financial products, where no exemption from the rules on offerings of securities to the public applies under (a) and (b) above, the subsequent distribution of the notes on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under the Financial Services Act and CONSOB Regulation No. 11971. Furthermore, Article 100-bis of the Financial Services Act affects the transferability of the notes in the Republic of Italy to the extent that any placing of the notes is made solely with qualified investors and the notes are then systematically resold to non-qualified investors on the secondary market at any time in the 12 months following such placing. Where this occurs, if a prospectus has not been published, purchasers of the notes who are acting outside of the course of their business or profession may be entitled to declare such purchase null and void and to claim damages from any authorized intermediary at whose premises the notes were purchased, unless an exemption provided for by the Financial Services Act applies.

Japan.    The notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended, the “FIEL”). Each selling agent has represented, warranted and agreed that it has not offered or sold and will not offer or sell any notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person or resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the

 

S-25


Table of Contents

registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws, regulations, and ministerial guidelines of Japan.

If the offer is made by way of a qualified institutional investors private placement as set out in Article 2, Paragraph 3, Item 2(i) or Article 2, Paragraph 4, Item 2(i) of the FIEL (the “QII Private Placement”), the notes are being offered only to qualified institutional investors (the “QIIs”) as defined in Article 10 of the Cabinet Office Ordinance Concerning the Definition of Terms provided in Article 2 of the FIEL and the investor of any notes is prohibited from transferring such notes to any person in any way other than to QIIs. As the offering of the notes satisfies the requirements provided in Article 2, Paragraph 3, Item 2(i) or Article 2, Paragraph 4, Item 2(i) of the FIEL, no securities registration statement has been or will be filed under Article 4, Paragraph 1 of the FIEL.

Except in the case the offering is made by way of QII Private Placement, the notes are being offered only to a small number of potential investors (i.e., less than 50 offerees, except QIIs who are offered the notes pursuant to the QII Private Placement), and the investor of any notes (other than the above-mentioned QII investors) is prohibited from transferring such notes to another person in any way other than as a whole to one transferee unless the total number of notes is less than 50 and the notes cannot be divided into any unit/denomination smaller than the unit/denomination represented on the note certificate therefor. As the offering of the notes satisfies the requirements provided in Article 2, Paragraph 3, Item 2(ha) or Article 2, Paragraph 4, Item 2(ha) of the FIEL, no securities registration statement has been or will be filed under Article 4, Paragraph 1 of the FIEL.

Mexico.    The notes have not been and will not be registered in the National Securities Registry (Registro Nacional de Valores). Therefore, the notes may not be offered or sold in the United Mexican States (“Mexico”) by any means except in circumstances which constitute a private offering (oferta privada) pursuant to Article 8 of the Securities Market Law (Ley del Mercado de Valores) and related ancillary regulations. All applicable provisions of the Securities Market Law must be complied with in respect to anything done in relation to the notes in, from or otherwise involving Mexico.

Bank of America Corporation is an entity incorporated pursuant to the laws of the United States of America and holds no authorization permit or license issued by any Mexican governmental agency, regulator or authority in order to operate as a financial entity in Mexico and is not subject to the supervision of Mexican financial authorities.

Netherlands.    We do not have an authorization from the Dutch Central Bank (De Nederlandsche Bank N.V.) pursuant to the Dutch Financial Supervision Act (Wet op het financieel toezicht) for the pursuit of the business of a credit institution in the Netherlands and therefore do not have a license pursuant to section 2.11(1), 2.12(1), 2.13(1) or 2.20(1) of the Dutch Financial Supervision Act.

Each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that it has not made and will not make an offer of the notes to the public in the Netherlands other than to qualified investors (gekwalificeerde beleggers), provided that no such offer of the notes will require us or any selling agent to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

New Zealand.    No action has been taken to permit the notes to be offered or sold to any retail investor, or otherwise under any regulated offer in terms of the Financial Markets Conduct Act 2013 (“FMCA”). In particular, no product disclosure statement under the FMCA has been prepared or lodged in New Zealand in relation to the notes.

 

S-26


Table of Contents

No person may directly or indirectly offer, sell or deliver any notes in New Zealand, or distribute or publish in New Zealand any offering material or advertisement to any person in relation to any offer of notes, in New Zealand, other than to a “wholesale investor” as that term is defined in clause 3(2)(a), (c) or (d) of Schedule 1 to the FMCA, being a person who is:

 

  (i)

an “investment business”;

 

  (ii)

“large”; or

 

  (iii)

a “government agency”,

in each case as defined in Schedule 1 to the FMCA.

Philippines.    THE NOTES BEING OFFERED OR SOLD HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FUTURE OFFER OR SALE THEREOF IS SUBJECT TO REGISTRATION REQUIREMENTS UNDER THE SECURITIES REGULATION CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.

Singapore.    This prospectus supplement and the accompanying prospectus have not been registered as a prospectus with the Monetary Authority of Singapore.

Accordingly, this prospectus supplement and the accompanying prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

  (a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

  (b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the notes pursuant to an offer made under Section 275 of the SFA except:

 

  (1)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

S-27


Table of Contents
  (2)

where no consideration is, or will be given, for the transfer;

 

  (3)

where the transfer is by operation of law;

 

  (4)

as specified in Section 276(7) of the SFA; or

 

  (5)

as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

South Korea.    The notes have not been and will not be registered under the Financial Investments Services and Capital Markets Act of Korea and the decrees and regulations thereunder (the “FSCMA”) and the notes have been and will be offered in Korea as a private placement under the FSCMA. None of the notes may be offered, sold and delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder (the “FETL”). For a period of one year from the issue date of the notes, any acquirer of the notes who was solicited to buy the notes in Korea is prohibited from transferring any of the notes to another person in any way other than as a whole to one transferee. Furthermore, the purchaser of the notes shall comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the notes.

Each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that it has not offered, sold or delivered the notes directly or indirectly, or offered or sold the notes to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea and will not offer, sell or deliver the notes directly or indirectly, or offer or sell the notes to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FSCMA, the FETL and other relevant laws and regulations of Korea.

Spain.    The notes may not be listed, offered, sold or distributed in Spain, except in accordance with the requirements set out in the Spanish laws transposing the Prospectus Directive in Spain, in particular: Royal Decree 4/2015 of 23 October, approving the recast text of the Securities Markets Law (Real Decreto Legislativo 4/2015, de 23 de octubre, por el que se aprueba el texto refundido de la Ley del Mercado de Valores), as amended and restated (the “Securities Markets Law”), and Royal Decree 1310/2005, of 4 November, on admission to trading of securities in official secondary markets, public offerings and prospectus, (Real Decreto 1310/2004, de 4 de noviembre, por el que se desarrolla parcialmente la Ley 24/1988, de 28 de Julio, del Mercado de Valores, en materia de admisión a negociación de valores en mercados secundarios oficiales, de ofertas públicas de venta o suscripción y del folleto exigible a tales efectos), as amended and restated (the “Royal Decree 1310/2005”), or any other related regulations that may be in force from time to time, as further amended, supplemented or restated.

In Spain, the exemption from the need to publish a prospectus envisaged in Article 3(2)(e) of the Prospectus Directive has been set out as follows: “an offer of securities with a total consideration in the Union of less than EUR 5 million which shall be calculated over a period of 12-months”, according to Article 35 of the Securities Markets Law and Article 38 of the Royal Decree 1310/2005.

Switzerland.    If the notes are offered or distributed into, in or from Switzerland and unless stated otherwise in the applicable pricing supplement, (a) each selling agent has represented and agreed that it will not, directly or indirectly, (i) publicly offer, sell, or advertise the notes in or from

 

S-28


Table of Contents

Switzerland, as such term is defined or interpreted under the Swiss Code of Obligations (“CO”), or (ii) if and to the extent that the notes qualify as structured products within the meaning of the Swiss Federal Act on Collective Investment Schemes (“CISA”), distribute the notes to non-qualified investors (as such term is defined in the CISA) into, in or from Switzerland, unless the notes are offered and distributed into, in or from Switzerland in compliance with the CISA, its implementing ordinance and all other applicable laws and regulations in Switzerland, or (iii) distribute or otherwise make available this prospectus supplement and the accompanying prospectus or any other document related to the notes in Switzerland in a way that would constitute a public offering of the notes or a distribution of the notes to non-qualified investors within the meaning of the CISA, as the case may be, and (b) each selling agent has acknowledged and agreed that neither the prospectus supplement and the accompanying prospectus nor any other document related to the notes constitutes a prospectus in the sense of Article 652a or 1156 CO, or a simplified prospectus in the sense of Article 5 of the CISA.

Taiwan.    The notes, if listed on the Taipei Exchange for sale to professional or general investors in Taiwan, may be sold in Taiwan to all professional or general investors, as applicable, or, if not listed in Taiwan, the notes may be made available (i) to investors in Taiwan through licensed Taiwan financial institutions to the extent permitted under relevant Taiwan laws and regulations; (ii) to the Offshore Banking Units of Taiwan banks purchasing the notes either for their proprietary account or in trust for their non-Taiwan trust clients; (iii) the Offshore Securities Units of Taiwan securities firms purchasing the notes either for their proprietary account, in trust for their trust clients or as agent for their brokerage clients; (iv) the Offshore Insurance Units of Taiwan insurance companies purchasing the notes for their proprietary account or in connection with the issuance of investment linked insurance policies to non-Taiwan policy holders; or (v) outside of Taiwan to all Taiwan resident investors for purchase by such investors outside Taiwan, but are not permitted to otherwise be offered or sold in Taiwan.

The notes will only be sold in accordance with the Taiwan selling restrictions in the preceding paragraph and are not permitted to otherwise be offered or sold.

United Arab Emirates.    The offering of the notes has not been approved or licensed by the Central Bank of the United Arab Emirates (“UAE”), the UAE Securities and Commodities Authority (“SCA”), the Dubai Financial Services Authority (“DFSA”) or any other relevant licensing authorities in the UAE, and accordingly does not constitute a public offer of securities in the UAE in accordance with the commercial companies law, Federal Law No. 2 of 2015 (as amended) and SCA Resolution No. 3 R.M. of 2017 Regulating Promotions and Introductions. Accordingly, the notes may not be offered to the public in the UAE (including the Dubai International Financial Centre).

This prospectus supplement and the accompanying prospectus are strictly private and confidential and are being issued to a limited number of institutional and individual investors:

 

  (a)

who meet the criteria of a Qualified Investor as defined in SCA Resolution No. 3 R.M. of 2017 (except natural persons);

 

  (b)

upon their request and confirmation that they understand that the notes have not been approved or licensed by or registered with the UAE Central Bank, the SCA, DFSA or any other relevant licensing authorities or governmental agencies in the UAE; and

 

  (c)

must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose.

 

S-29


Table of Contents

United Kingdom.    Each selling agent has represented and agreed, and each further selling agent appointed in connection with the notes will be required to represent and agree, that:

 

  (a)

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) received by it in connection with the issue or sale of any notes in circumstances in which section 21(1) of the FSMA does not apply to us; and

 

  (b)

it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any notes in, from, or otherwise involving the United Kingdom.

Uruguay.    The notes have not been registered under Law No. 18.627 of December 2, 2009 with the Superintendency of Financial Services of the Central Bank of Uruguay. The notes are not available publicly in Uruguay and are offered only on a private basis. No action may be taken in Uruguay that would render any offering of the notes a public offering in Uruguay. No Uruguayan regulatory authority has approved the notes or passed on our solvency. In addition, any resale of the notes must be made in a manner that will not constitute a public offering in Uruguay.

Los valores no han sido registrados bajo la Ley de Mercado de Valores de la República Oriental del Uruguay o registrados ante el Banco Central del Uruguay. Los valores no son ofrecidos en forma pública en Uruguay y lo son únicamente en forma privada. Ninguna acción puede ser adoptada en Uruguay en relación a estos valores que resulte en que esta oferta de valores sea una oferta pública de valores en Uruguay. Ninguna autoridad regulatoria del Uruguay ha aprobado estos valores o se ha manifestado sobre nuestra solvencia. Adicionalmente, cualquier reventa de estos valores debe ser realizada en forma tal que no constituya oferta pública de valores en el Uruguay.

Venezuela.    The notes have not been registered with the Comision Nacional de Valores de Venezuela and are not being publicly offered in Venezuela. No document related to the offering of the notes, including this prospectus supplement and the accompanying prospectus, shall be interpreted to constitute an offer of securities or an offer or the rendering of any investment advice, securities brokerage, and/or banking services in Venezuela. Investors wishing to acquire the notes may use only funds located outside of Venezuela.

 

S-30


Table of Contents

LEGAL MATTERS

The legality of the notes will be passed upon for us by McGuireWoods LLP, Charlotte, North Carolina. Davis Polk & Wardwell LLP, New York, New York or such other counsel as may be indicated in the applicable supplement will pass upon certain legal matters relating to the notes for the selling agents. McGuireWoods LLP regularly performs legal services for us.

 

S-31


Table of Contents

PROSPECTUS

 

LOGO

$123,000,000,000

Debt Securities, Warrants, Units, Purchase Contracts,

Preferred Stock, Depositary Shares, and Common Stock

We from time to time may offer to sell up to $123,000,000,000, or the equivalent thereof in any other currency, of our debt securities, warrants, purchase contracts, preferred stock, depositary shares representing fractional interests in preferred stock, and common stock, as well as units comprised of one or more of these securities, in any combination. The debt securities, warrants, purchase contracts, and preferred stock may be convertible into or exercisable or exchangeable for our common or preferred stock. Our common stock is listed on the New York Stock Exchange under the symbol “BAC.” The other securities that we may offer from time to time under this prospectus may be listed on the New York Stock Exchange or another national securities exchange, as specified in the applicable supplement.

This prospectus provides a general description of material terms of these securities that are known as of the date of this prospectus and the general manner in which we will offer the securities. These securities may be offered for sale from time to time in amounts, on terms and at prices as shall be determined in connection with such offer and sale. These terms and prices will be described in one or more supplements hereto. When we sell a particular issue of securities, we will provide one or more supplements to this prospectus describing the offering and the specific terms of those securities. You should read this prospectus and any applicable supplement carefully before you invest.

We will use this prospectus in the initial sale of these securities. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, or any of our other broker-dealer affiliates, may use this prospectus in a market-making transaction in any of these securities after their initial sale. Unless you are informed otherwise in the confirmation of sale, this prospectus is being used in a market-making transaction.

Potential purchasers of our securities should consider the information set forth in the “Risk Factors” section beginning on page 9.

 

 

Our securities are unsecured and are not savings accounts, deposits, or other obligations of a bank, are not guaranteed by Bank of America, N.A. or any other bank, are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, and may involve investment risks, including possible loss of principal.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

Prospectus dated June 29, 2018


Table of Contents

TABLE OF CONTENTS

 

     Page  

About this Prospectus

     3  

Prospectus Summary

     4  

Risk Factors

     9  

Risks Relating to Regulation Resolution Strategies and Long-Term Debt Requirements

     9  

Risks Relating to Debt Securities

     10  

Risks Related to Our Common Stock and Preferred Stock

     13  

Risks Relating to Certain Floating Rate Securities

     15  

Other Risks

     15  

Currency Risks

     16  

Bank of America Corporation

     20  

Use of Proceeds

     20  

Description of Debt Securities

     21  

General

     21  

Financial Consequences to Unsecured Debtholders of Single Point of Entry Resolution Strategy

     21  

The Indentures

     22  

Form and Denomination of Debt Securities

     23  

Different Series of Debt Securities

     24  

Fixed-Rate Notes

     26  

Floating-Rate Notes

     26  

Fixed/Floating-Rate Notes

     36  

Original Issue Discount Notes

     36  

Payment of Principal, Interest, and Other Amounts Payable

     36  

No Sinking Fund

     40  

Redemption

     40  

Repayment

     45  

Repurchase

     45  

Conversion

     45  

Exchange, Registration, and Transfer

     45  

Subordination

     46  

Sale or Issuance of Capital Stock of Banks

     47  

Limitation on Mergers and Sales of Assets

     48  

Waiver of Covenants

     48  

Modification of the Indentures

     48  

Meetings and Action by Securityholders

     49  

Events of Default and Rights of Acceleration; Covenant Breaches

     49  

Collection of Indebtedness and Suits for Enforcement by Trustee

     50  

Limitation on Suits

     51  

Payment of Additional Amounts

     51  

Redemption for Tax Reasons

     55  

Defeasance and Covenant Defeasance

     55  

Satisfaction and Discharge of the Indenture

     56  

Notices

     56  

Concerning the Trustees

     56  

Governing Law

     57  

Description of Warrants

     58  

General

     58  

Description of Securities Warrants

     58  

Description of Index Warrants

     59  

Description of Currency Warrants

     59  

Modification

     60  

Enforceability of Rights of Warrantholders, No Trust Indenture Act Protection

     60  

Description of Purchase Contracts

     61  

General

     61  

Purchase Contract Property

     61  

Information in Supplement

     61  
     Page  

Prepaid Purchase Contracts; Applicability of Indenture

     62  

Non-Prepaid Purchase Contracts; No Trust Indenture Act Protection

     63  

Pledge by Holders to Secure Performance

     63  

Settlement of Purchase Contracts that Are Part of Units

     63  

Failure of Holder to Perform Obligations

     64  

Description of Units

     65  

General

     65  

Unit Agreements: Prepaid, Non-Prepaid, and Other

     65  

Modification

     66  

Enforceability of Rights of Unitholders; No Trust Indenture Act Protection

     66  

Description of Preferred Stock

     67  

General

     67  

Dividends

     68  

Voting

     68  

Liquidation Preference

     68  

Preemptive Rights

     69  

Existing Preferred Stock

     69  

Additional Classes or Series of Stock

     106  

Description of Depositary Shares

     107  

General

     107  

Terms of the Depositary Shares

     107  

Withdrawal of Preferred Stock

     107  

Dividends and Other Distributions

     108  

Redemption of Depositary Shares

     108  

Voting the Deposited Preferred Stock

     108  

Amendment and Termination of the Deposit Agreement

     109  

Charges of Depository

     109  

Miscellaneous

     109  

Resignation and Removal of Depository

     109  

Description of Common Stock

     110  

General

     110  

Voting and Other Rights

     110  

Dividends

     110  

Certain Anti-Takeover Matters

     111  

Registration and Settlement

     112  

Book-Entry Only Issuance

     112  

Definitive Securities

     112  

Street Name Owners

     113  

Legal Holders

     113  

Special Considerations for Indirect Owners

     113  

Depositories for Global Securities

     114  

Special Considerations for Global Securities

     119  

U.S. Federal Income Tax Considerations

     122  

Taxation of Debt Securities

     123  

Taxation of Common Stock, Preferred Stock, and Depositary Shares

     138  

Taxation of Warrants

     143  

Taxation of Purchase Contracts

     143  

Taxation of Units

     143  

Reportable Transactions

     143  

Foreign Account Tax Compliance Act

     144  

Plan of Distribution (Conflicts of Interest)

     145  

Distribution Through Underwriters

     145  

Distribution Through Dealers

     146  

Distribution Through Agents

     146  

Direct Sales

     146  

General Information

     146  

Market-Making Transactions by Affiliates

     147  

Conflicts of Interest

     147  

ERISA Considerations

     149  

Where You Can Find More Information

     152  

Forward-Looking Statements

     153  

Legal Matters

     154  

Experts

     154  
 

 

2


Table of Contents

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or the “SEC,” utilizing a “shelf” registration process. Under this shelf process, we may, from time to time, sell any type of the securities described in this prospectus or the registration statement in one or more offerings.

This prospectus provides you with a general description of the material terms of securities we may offer that are known as of the date of this prospectus and the general manner in which we will offer the securities. Each time we offer and sell securities, we will provide one or more prospectus supplements and/or pricing supplements that describe the particular securities offering and the specific terms of the securities being offered. These documents also may add, update, or change information contained in this prospectus. In this prospectus, when we refer to the “applicable supplement,” we mean the prospectus supplement or supplements, as well as any applicable pricing supplements, that describe the particular securities being offered to you. If there is any inconsistency between the information in this prospectus and the applicable supplement, you should rely on the information in the applicable supplement.

The information in this prospectus is not complete and may be changed. You should rely only on the information provided in or incorporated by reference in this prospectus, the applicable supplement, or documents to which we otherwise refer you. We are not making an offer of these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and the applicable supplement, as well as information we have filed or will file with the SEC and incorporated by reference in this prospectus, is accurate only as of the date of the applicable document or other date referred to in that document. Our business, financial condition, and results of operations may have changed since that date.

Unless we indicate otherwise or unless the context requires otherwise, all references in this prospectus to “Bank of America,” “we,” “us,” “our,” or similar references are to Bank of America Corporation excluding its consolidated subsidiaries.

References in this prospectus to “$” and “dollars” are to the currency of the United States of America; and references in this prospectus to “€” and “euro” are to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to Article 109g of the Treaty establishing the European Community, as amended from time to time.

 

3


Table of Contents

PROSPECTUS SUMMARY

This summary section provides a brief overview of material terms of the securities we may offer that are known as of the date of this prospectus and highlights other selected information from this prospectus. This summary does not contain all the information that you should consider before investing in the securities we may offer using this prospectus. To fully understand the securities we may offer, you should read carefully:

 

   

this prospectus, which provides a general description of the material terms of the securities we may offer;

 

   

the applicable supplement, which describes the specific terms of the particular securities we are offering and the offering, and which may update or change the information in this prospectus; and

 

   

the documents we refer to in “Where You Can Find More Information” below for information about us, including our financial statements.

Bank of America Corporation

Bank of America Corporation is a Delaware corporation, a bank holding company, and a financial holding company. Through our banking and various nonbank subsidiaries throughout the United States and in international markets, we provide a diversified range of banking and nonbank financial services and products. Our principal executive offices are located in the Bank of America Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255 and our telephone number is (704) 386-5681.

The Securities We May Offer

We may use this prospectus to offer up to $123,000,000,000, or the equivalent thereof in any other currency, of any of the following securities from time to time:

 

   

debt securities;

 

   

warrants;

 

   

purchase contracts;

 

   

preferred stock;

 

   

depositary shares representing fractional interests in preferred stock;

 

   

common stock; and

 

   

units, comprised of one or more of any of the securities referred to above, in any combination.

When we use the term “securities” in this prospectus, we mean any of the securities we may offer using this prospectus, unless we specifically state otherwise. This prospectus, including this summary, describes the general terms of the securities we may offer. Each time we sell securities, we will provide you with the applicable supplement or supplements that will describe the offering and the specific terms of the securities being offered. A supplement may include a discussion of additional U.S. federal income tax consequences and any additional risk factors or other special considerations applicable to those particular securities.



 

4


Table of Contents

Debt Securities

Our debt securities may be either senior or subordinated obligations in right of payment. Our senior and subordinated debt securities will be issued under separate indentures, or contracts, that we have with The Bank of New York Mellon Trust Company, N.A., as trustee. The particular terms of each series of debt securities that we offer under this prospectus will be described in the applicable supplement.

Warrants

We may offer warrants, including:

 

   

warrants for the purchase of, or whose cash value is determined by reference to the performance, level, or value of our debt securities, common or preferred stock;

 

   

warrants entitling the holders thereof to receive from us, upon exercise, an amount in cash determined by reference to decreases or increases in the level of a specific index or in the levels (or relative levels) of two or more indices or combinations of indices, which index or indices may be based on one or more stocks, bonds or other securities, one or more currencies or currency units, or any combination of the foregoing; and

 

   

warrants entitling the holders thereof to receive from us, upon exercise, an amount in cash determined by reference to decreases or increases in the price or level (or relative price, level or exchange rate) of specified amounts of one or more currencies or currency units.

For any warrants we may offer, we will describe in the applicable supplement the underlying securities or underlying property, the expiration date, the exercise price or the manner of determining the exercise price, the amount and kind, or the manner of determining the amount and kind, of property to be delivered by you or us upon exercise, and any other specific terms of the warrants. We will issue warrants under warrant agreements that we will enter into with one or more warrant agents.

Purchase Contracts

We may offer purchase contracts for the purchase of, or whose cash value is determined by reference to the performance, level, or value of our common or preferred stock or other securities described in this prospectus, a basket of securities or any combination of the foregoing.

For any purchase contracts we may offer, we will describe in the applicable supplement the underlying property, the settlement date, the purchase price, or manner of determining the purchase price, and whether it must be paid when the purchase contract is issued or at a later date, the amount and kind, or manner of determining the amount and kind, of property to be delivered at settlement, whether the holder will pledge property to secure the performance of any obligations the holder may have under the purchase contract, and any other specific terms of the purchase contracts.

Units

We may offer units consisting of one or more securities described in this prospectus, in any combination. For any units we may offer, we will describe in the applicable supplement the



 

5


Table of Contents

particular securities that comprise each unit, whether or not the particular securities will be separable and, if they will be separable, the terms on which they will be separable, a description of the provisions for the payment, settlement, transfer, or exchange of the units, and any other specific terms of the units. We will issue units under unit agreements that we will enter into with one or more unit agents.

Preferred Stock and Depositary Shares

We may offer our preferred stock in one or more series. For any particular series we may offer, we will describe in the applicable supplement:

 

   

the specific designation;

 

   

the aggregate number of shares offered;

 

   

the dividend rate and periods, or manner of calculating the dividend rate and periods, if any;

 

   

the stated value and liquidation preference amount, if any;

 

   

the voting rights, if any;

 

   

the terms on which the series of preferred stock is convertible into shares of our common stock, preferred stock of another series, or other securities, if any;

 

   

the redemption terms, if any; and

 

   

any other specific terms of the series.

We also may offer depositary shares, each of which will represent a fractional interest in a share or multiple shares of our preferred stock. We will describe in the applicable supplement any specific terms of the depositary shares. We will issue the depositary shares under deposit agreements that we will enter into with one or more depositories.

Form of Securities

Unless we specify otherwise in the applicable supplement, we will issue the securities in book-entry only form through one or more depositories, such as The Depository Trust Company, Euroclear Bank SA/NV, Clearstream Banking, société anonyme, Luxembourg, or CDS Clearing and Depository Services Inc., as identified in the applicable supplement. We will issue the securities only in registered form, without coupons, although we may issue the securities in bearer form if we so specify in the applicable supplement. The securities issued in book-entry only form will be uncertificated or will be represented by a global security registered in the name of the specified depository, rather than certificated securities in definitive form registered in the name of each individual owner. Unless we specify otherwise in the applicable supplement, each sale of securities in book-entry only form will settle in immediately available funds through the specified depository.

A global security may be exchanged for certificated securities in definitive form registered in the names of the beneficial owners only under the limited circumstances described in this prospectus.



 

6


Table of Contents

Payment Currencies

All amounts payable in respect of the securities, including the purchase price, will be payable in U.S. dollars, unless we specify otherwise in the applicable supplement.

Listing

We will state in the applicable supplement whether the particular securities that we are offering will be listed or quoted on a securities exchange or quotation system.

Distribution

We may offer the securities under this prospectus:

 

   

through underwriters;

 

   

through dealers;

 

   

through agents; or

 

   

directly to purchasers.

The applicable supplement will include any required information about the firms we use and the discounts or commissions we may pay them for their services.

Merrill Lynch, Pierce, Fenner & Smith Incorporated, or any of our other broker-dealer affiliates, may be an underwriter, dealer or agent for us.

Market-Making by Our Affiliates

Following the initial distribution of an offering of securities, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and other broker-dealer affiliates of ours, may offer and sell those securities in the course of their businesses as broker-dealers. Merrill Lynch, Pierce, Fenner & Smith Incorporated and any such other broker-dealer affiliates may act as a principal or agent in these transactions. This prospectus and the applicable supplement or supplements also will be used in connection with these market-making transactions. Sales in any of these market-making transactions will be made at varying prices related to prevailing market prices and other circumstances at the time of sale.

If you purchase securities in a market-making transaction, you will receive information about the purchase price and your trade and settlement dates in a separate confirmation of sale.



 

7


Table of Contents

Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Dividends

The following table sets forth our consolidated ratios of earnings to fixed charges and earnings to fixed charges and preferred dividends for the periods indicated.

 

    Three Months Ended    Year Ended December 31,  

(Dollars in millions)

  March 31, 2018    2017      2016      2015      2014      2013  

Ratio of earnings to fixed charges
(excluding interest on deposits)

  3.43      3.45        3.52        3.07        1.71        2.18  

Ratio of earnings to fixed charges
(including interest on deposits)

  2.99      3.11        3.28        2.92        1.65        2.06  

Ratio of earnings to fixed charges and preferred dividends (excluding interest on deposits)

  2.98      2.84        2.84        2.57        1.50        1.91  

Ratio of earnings to fixed charges and preferred dividends (including interest on deposits)

  2.66      2.62        2.70        2.47        1.46        1.83  


 

8


Table of Contents

RISK FACTORS

This section summarizes some specific risks and investment considerations with respect to an investment in our securities. This summary does not describe all of the risks and investment considerations with respect to an investment in our securities, including risks and considerations relating to a prospective investor’s particular circumstances. For information regarding risks and uncertainties that may materially affect our business and results, please refer to the information under the caption “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2017, which is incorporated by reference in this prospectus, as well as those risks and uncertainties discussed in our subsequent filings that are incorporated by reference in this prospectus. You also should review the risk factors that will be set forth in other documents that we will file after the date of this prospectus, together with the risk factors set forth in any applicable supplement for a particular offering of securities. Prospective investors should consult their own financial, legal, tax, and other professional advisors as to the risks associated with an investment in our securities and the suitability of the investment for the investor.

Risks Relating to Regulatory Resolution Strategies and Long-Term Debt Requirements

A resolution under our single point of entry resolution strategy could materially adversely affect our liquidity and financial condition and our ability to pay our obligations on our securities.

We are required periodically to submit a plan to the Federal Deposit Insurance Corporation (“FDIC”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”) describing our resolution strategy under the U.S. Bankruptcy Code in the event of material financial distress or failure. In our current plan, our preferred resolution strategy is a single point of entry (“SPOE”) strategy. This strategy provides that only Bank of America (the parent holding company) files for resolution under the U.S. Bankruptcy Code and contemplates providing certain key operating subsidiaries with sufficient capital and liquidity to operate through severe stress and to enable such subsidiaries to continue operating or be wound down in a solvent manner following a Bank of America bankruptcy. We have entered into intercompany arrangements governing the contribution of most of our capital and liquidity to these key subsidiaries. As part of these arrangements, we have transferred most of our assets (and have agreed to transfer additional assets) to a wholly-owned holding company subsidiary in exchange for a subordinated note. Certain of our remaining assets secure our ongoing obligations under these intercompany arrangements. The wholly-owned holding company subsidiary also has provided us with a committed line of credit that, in addition to our cash, dividends and interest payments, including interest payments we receive in respect of the subordinated note, may be used to fund our obligations. These intercompany arrangements include provisions to terminate the line of credit and forgive the subordinated note and require us to contribute our remaining financial assets to the wholly-owned holding company subsidiary if our projected liquidity resources deteriorate so severely that our resolution becomes imminent, which could materially and adversely affect our liquidity and ability to meet our obligations on our securities. In addition, our preferred resolution strategy could result in holders of our securities being in a worse position and suffering greater losses than would have been the case under bankruptcy or other resolution scenarios or plans.

Under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Financial Reform Act”), when a global systemically important banking organization (“G-SIB”), such as Bank of America, is in default or danger of default, the FDIC may be appointed receiver in order to conduct an orderly liquidation of such institution. In the event of such appointment, the FDIC could, among other things, invoke the orderly liquidation authority, instead of the U.S. Bankruptcy Code, if the Secretary of the U.S. Department of Treasury makes certain financial

 

9


Table of Contents

distress and systemic risk determinations. In 2013, the FDIC issued a notice describing its preferred “single point of entry” strategy for resolving a G-SIB. Under this approach, the FDIC could replace Bank of America with a bridge holding company, which could continue operations and result in an orderly resolution of the underlying bank, but whose equity would be held solely for the benefit of our creditors. The FDIC’s single point of entry strategy may result in holders of our securities suffering greater losses than would have been the case under a bankruptcy proceeding or a different resolution strategy.

If we enter a resolution proceeding, holders of our debt securities and equity securities would be at risk of absorbing our losses.

Under the rules of the Federal Reserve relating to total loss-absorbing capacity (the “TLAC Rules”), we are required to maintain minimum amounts of unsecured external long-term debt satisfying certain eligibility criteria (“eligible LTD”) and other loss-absorbing capacity for the purpose of absorbing our losses in a resolution proceeding under either the U.S. Bankruptcy Code or Title II of the Financial Reform Act. If we enter a resolution proceeding under either the U.S. Bankruptcy Code or Title II of the Financial Reform Act, our losses would be imposed first on holders of our equity securities and thereafter on our unsecured debt, including our debt securities, and some or all of such securities could be significantly reduced or eliminated.

Under our SPOE resolution strategy, and the single point of entry strategy preferred by the FDIC under Title II of the Financial Reform Act, the value that would be distributed to holders of our unsecured debt, including our debt securities, may not be sufficient to repay all or part of the principal amount and interest on such debt, and holders of such debt could receive no consideration at all under these resolution scenarios. Either of these resolution strategies could result in holders of our debt securities being in a worse position and suffering greater losses than would have been the case under a different resolution strategy. Although SPOE is our preferred resolution strategy, neither Bank of America nor a bankruptcy court would be obligated to follow our SPOE strategy. Additionally, the FDIC is not obligated to follow its single point of entry strategy to resolve Bank of America under Title II of the Financial Reform Act. For more information regarding the financial consequences of any such resolution proceeding, see “Description of Debt Securities—Financial Consequences to Unsecured Debtholders of Single Point of Entry Resolution Strategy” below.

We are subject to the Federal Reserve’s final rules requiring U.S. G-SIBs to maintain minimum amounts of long-term debt meeting specified eligibility requirements.

Commencing January 1, 2019, under the TLAC Rules, the U.S. G-SIBs, including Bank of America, are required to, among other things, maintain minimum amounts of eligible LTD, and other loss-absorbing capacity. Any senior long-term debt issued on or after January 1, 2017 must include terms required by the TLAC Rules in order to qualify as eligible LTD. Actions required to comply with the TLAC Rules could impact our funding and liquidity risk management plans.

Risks Relating to Debt Securities

Our obligations on the debt securities will be structurally subordinated to liabilities of our subsidiaries.

Because we are a holding company, our right to participate in any distribution of assets of any subsidiary upon such subsidiary’s liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent we may ourselves be recognized as a creditor of that subsidiary. As a result, our obligations under the debt securities will be structurally

 

10


Table of Contents

subordinated to all existing and future liabilities of our subsidiaries, and claimants should look only to our assets for payments. In addition, our debt securities will be unsecured and, therefore, in a bankruptcy or similar proceeding, will effectively rank junior to our secured obligations to the extent of the value of the assets securing such obligations. Further, creditors of subsidiaries recapitalized pursuant to our resolution plan generally would be entitled to payment of their claims from the assets of the subsidiaries, including our contributed assets.

Holders of our debt securities could be at greater risk for being structurally subordinated if we sell or convey all or substantially all of our assets to one or more of our majority-owned subsidiaries.

If we sell or convey all or substantially all of our assets to one or more direct or indirect majority-owned subsidiaries of ours, under the indentures under which the debt securities will be issued, the subsidiary or subsidiaries will not be required to assume our obligations under such debt securities, and we will remain the sole obligor on such debt securities. In such event, creditors of any such subsidiary or subsidiaries would have additional assets from which to recover on their claims while holders of our debt securities would be structurally subordinated to creditors of such subsidiary or subsidiaries with respect to such assets. See “Description of Debt Securities—Limitation on Mergers and Sales of Assets” below for more information.

Events for which acceleration rights under our senior debt securities may be exercised are more limited than those available pursuant to the terms of our outstanding senior debt securities issued prior to January 13, 2017.

In response to the TLAC Rules, on January 13, 2017, we modified the terms of our senior debt securities to be issued on or after that date to, among other things, limit the circumstances under which the payment of the principal amount of such senior debt securities can be accelerated (unless specified otherwise in the applicable supplement).

All or substantially all of our outstanding senior debt securities issued prior to January 13, 2017 (the “Pre-2017 Senior Debt Securities”) provide acceleration rights for nonpayment or bankruptcy. The Pre-2017 Senior Debt Securities also provide acceleration rights if we default in the performance of our covenants in those debt securities or the applicable indenture under which those securities were issued. In addition, the Pre-2017 Senior Debt Securities do not require a 30-day cure period before a nonpayment of principal becomes an event of default and acceleration rights become exercisable with respect to such nonpayment.

However, under the 1995 Senior Indenture (as supplemented) and the 2018 Senior Indenture (each as defined below), unless we specify otherwise in the applicable supplement, payment of the principal amount of our senior debt securities issued under either such indenture:

 

   

may be accelerated only (i) if we default in the payment of the principal of or interest on those senior debt securities and, in each case, the default continues for a period of 30 days, or (ii) upon our voluntary or involuntary bankruptcy and, in the case of our involuntary bankruptcy, the event continues for a period of 60 days; and

 

   

may not be accelerated if we default in the performance of any other covenants contained in such senior debt securities or the 1995 Senior Indenture or the 2018 Senior Indenture, as applicable.

As a result of these differing provisions, if we breach or otherwise default in the performance of a covenant (other than a payment covenant) that applies both to senior debt securities that we

 

11


Table of Contents

issued on or after January 13, 2017 and the Pre-2017 Senior Debt Securities, the Pre-2017 Senior Debt Securities would have acceleration rights that would not be available to the holders of our other senior debt securities. In addition, if we fail to pay principal when due with respect to our senior debt securities issued on or after on or after January 13, 2017 and the Pre-2017 Senior Debt Securities, an event of default would occur immediately with respect to the Pre-2017 Senior Debt Securities (and the exercise of acceleration rights could proceed immediately in accordance with the provisions of the 1995 Senior Indenture under which those debt securities were issued), while the holders of our other senior debt securities must wait for the 30-day cure period to expire before such nonpayment of principal becomes an event of default and any acceleration rights are triggered with respect to such nonpayment. Any repayment of the principal amount of Pre-2017 Senior Debt Securities following the exercise of acceleration rights in circumstances in which such rights are not available to the holders of our other senior debt securities could adversely affect our ability to make timely payments on such other senior debt securities thereafter.

The market value of the debt securities may be less than the principal amount of the debt securities.

The market for, and market value of, the debt securities may be affected by a number of factors. These factors include:

 

   

the method of calculating the principal of or any premium, interest or other amounts payable on the debt securities;

 

   

the time remaining to maturity of the debt securities;

 

   

the aggregate amount outstanding of the relevant debt securities;

 

   

any redemption or repayment features of the debt securities;

 

   

the level, direction, and volatility of market interest rates generally;

 

   

general economic conditions of the capital markets in the United States;

 

   

geopolitical conditions and other financial, political, regulatory and judicial events that affect the financial markets generally; and

 

   

any market-making activities with respect to the debt securities.

Often, the only way to liquidate your investment in the debt securities prior to maturity will be to sell the debt securities. At that time, there may be a very illiquid market for the debt securities or no market at all. If you sell your debt securities prior to maturity, you may receive less than the principal amount of such debt securities.

Acceleration rights for our subordinated debt securities are available only in limited circumstances.

The rights of acceleration under our subordinated debt securities are more limited than those available pursuant to the terms of our senior debt securities. Unless we specify otherwise in the applicable supplement, the payment of principal of our subordinated debt securities may be accelerated only in the event of our voluntary or involuntary bankruptcy under U.S. federal bankruptcy laws (and, in the case of our involuntary bankruptcy, such event continues for a period of 60 days). If you purchase any subordinated debt securities, you will have no right to accelerate

 

12


Table of Contents

the payment of principal of the subordinated debt securities if we fail to pay principal or interest when due on those subordinated debt securities or if we fail in the performance of any of our other obligations under those subordinated debt securities.

Our obligations under subordinated debt securities will be subordinated.

Holders of our subordinated debt securities should recognize that contractual provisions in the Subordinated Indentures (as defined below) may prohibit us from making payments on the subordinated debt securities. The subordinated debt securities are unsecured and subordinate and junior in right of payment to all of our senior indebtedness (as defined in the Subordinated Indentures), to the extent and in the manner provided in the Subordinated Indentures. In addition, the subordinated debt securities may be fully subordinated to interests held by the U.S. government in the event we enter into a receivership, insolvency, liquidation or similar proceedings, including a proceeding under Title II of the Financial Reform Act. For additional information regarding the subordination provisions applicable to the subordinated debt securities, see “Description of Debt Securities—Subordination” below.

Redemption of our debt securities prior to maturity may result in a reduced return on your investment.

The terms of our debt securities may permit or require redemption of the debt securities prior to maturity. That redemption may occur at a time when prevailing interest rates are relatively low. As a result, a holder of the redeemed debt securities may not be able to invest the redemption proceeds in a new investment that yields a similar return.

Risks Related to Our Common Stock and Preferred Stock

Our ability to pay dividends on our common stock and preferred stock may be limited by regulatory policies and requirements.

We are subject to various regulatory policies and requirements relating to capital actions, including payment of dividends. For example, Federal Reserve regulations require us to submit a capital plan as part of an annual Comprehensive Capital Analysis and Review (CCAR) in order to assess our capital planning process, including any planned capital actions, such as payment of dividends. We may be prohibited from taking capital actions, such as paying or increasing dividends on our common stock or preferred stock, if the Federal Reserve objects to our CCAR capital plan. Our ability to pay dividends is also affected by the various minimum capital requirements, capital ratios and buffers established by the Federal Reserve. Adverse business and economic conditions may reduce our capital ratios below requirements. Additionally, the applicable federal regulatory authority is authorized to determine, under certain circumstances relating to the financial condition of a bank or a bank holding company, like Bank of America, that the payment of dividends by such entity would be an unsafe or unsound practice and to prohibit payment of those dividends.

You may not receive dividends on our common stock.

Holders of our common stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. Furthermore, holders of our common stock are subject to the prior dividend rights of holders of our preferred stock or the depositary shares representing such preferred stock then outstanding. Although we have historically declared cash dividends on our common stock, we are not required to do so and may reduce or eliminate our common stock dividend in the future.

 

13


Table of Contents

Our common stock is equity and is subordinate to our existing and future indebtedness and preferred stock.

Shares of our common stock are equity interests in us and do not constitute indebtedness. This means that shares of our common stock will rank junior to all of our indebtedness and to other non-equity claims against us and our assets available to satisfy claims against us, including claims in our liquidation. Additionally, holders of our common stock are subject to the prior dividend and liquidation rights of holders of our outstanding preferred stock or depositary shares representing interests in such preferred stock then outstanding. Our board of directors is authorized to issue additional classes or series of preferred stock without any action on the part of the holders of our common stock. As of March 31, 2018, the aggregate liquidation preference of all our outstanding preferred stock was approximately $25 billion.

Our preferred stock is equity and is subordinate to our existing and future indebtedness.

Shares of our preferred stock are equity interests in us and do not constitute indebtedness. This means that shares of our preferred stock and any depositary shares which represent interests in shares of our preferred stock will rank junior to all of our indebtedness and to other non-equity claims against us and our assets available to satisfy claims against us, including claims in our liquidation. Our existing and future indebtedness may restrict payment of dividends on our preferred stock. In addition, holders of our preferred stock or depositary shares representing interests in shares of our preferred stock may be fully subordinated to interests held by the U.S. government in the event that we enter into a receivership, insolvency, liquidation, or similar proceeding.

Cash dividends on our preferred stock are subject to certain limitations.

Unlike indebtedness, where principal and interest customarily are payable on specified due dates, in the case of our preferred stock (1) dividends are payable only when, as and if declared by our board of directors or a duly authorized committee of our board of directors and (2) as a corporation, we are restricted to making dividend payments and redemption payments on our preferred stock out of legally available funds. In addition, under the Federal Reserve’s risk-based capital rules related to additional Tier 1 capital instruments, dividends on our preferred stock may only be paid out of our net income, retained earnings or surplus related to other additional Tier 1 capital instruments.

If we are deferring payments on our outstanding junior subordinated notes or are in default under the indentures governing those securities, we will be prohibited from making distributions on our common stock and preferred stock, or redeeming our preferred stock.

The terms of our currently outstanding junior subordinated notes prohibit us from declaring or paying any dividends or distributions on our common stock and preferred stock, or redeeming, purchasing, acquiring, or making a liquidation payment on such stock, if we are aware of any event that would be an event of default under the indenture governing those junior subordinated notes or at any time when we have deferred payment of interest on those junior subordinated notes.

 

14


Table of Contents

Risks Relating to Certain Floating Rate Securities

Regulation, reform, and the potential or actual discontinuation of “benchmarks,” including LIBOR and EURIBOR, may adversely affect the value of, return on and trading market for our floating rate securities that are based on a “benchmark.”

The London Interbank Offered Rate (“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”) and certain other rates or indices which are deemed to be “benchmarks” are the subject of ongoing national and international regulatory scrutiny and proposals for reform. Some of these reforms are already effective, while others are still to be implemented or formulated. These reforms may cause such “benchmarks” to perform differently than they performed in the past or to be discontinued entirely and may have other consequences that cannot be predicted. Any such consequences could adversely affect the value of, return on and trading market for any of our securities that are based on a “benchmark” to calculate interest or other payments due or dividends payable on those securities.

Any of the international, national or other proposals for reform or the general increased regulatory scrutiny of “benchmarks” could increase the costs and risks of administering or otherwise participating in the setting of a “benchmark” and complying with any such regulations or requirements. In addition, regulators have stated that they will no longer encourage or require banks to submit rates for LIBOR after 2021, and similar actions may be taken with respect to other “benchmarks” in the future. Such actions may have the effect of discouraging market participants from continuing to administer or participate in or contribute to certain “benchmarks,” trigger changes in the rules or methodologies used in certain “benchmarks,” or lead to the discontinuation of or unavailability of quotes for certain “benchmarks.” Uncertainty as to the nature and the effect of such reforms and actions and the potential or actual discontinuation of a “benchmark” may adversely affect the value of, return on and trading market for our securities that are based on a “benchmark.”

To the extent interest payments or dividends payable on securities are based on a specific “benchmark,” including LIBOR, that is discontinued or is no longer quoted, the applicable base rate will be determined using the applicable alternative methods described below under “Description of Debt Securities—Floating-Rate Notes,” unless we specify otherwise in the applicable supplement. Any of these alternative methods may result in interest rates and/or payments that are higher than, lower than or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on those notes if the relevant “benchmark” was available in its current form. Further, the same reforms, actions, costs and/or risks that may lead to the discontinuation or unavailability of a “benchmark” may make one or more of the alternative methods impossible or impracticable to determine. Any such consequence could have an adverse effect on the value of, return on and trading market for such securities.

Other Risks

Our ability to pay dividends on our common stock and preferred stock and to make payments on our debt securities depends upon our receipt of funds from our subsidiaries and applicable laws and regulations, and actions we have taken pursuant to our resolution plan, could restrict the ability of our subsidiaries to transfer funds to us.

We are a holding company and conduct substantially all of our operations through our subsidiaries. We depend on dividends and other distributions, loans, advances and other payments from our subsidiaries to fund dividend payments on our common stock and preferred stock and to

 

15


Table of Contents

fund payments on our other obligations, including the debt securities. Many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws that restrict dividend payments or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to us or to our other subsidiaries. In addition, our bank and broker-dealer subsidiaries are subject to restrictions on their ability to lend or transact with affiliates and to minimum regulatory capital and liquidity requirements. Lower earnings in our subsidiaries can reduce the amount of funds available to us. Adverse business and economic conditions could affect our businesses and results of operations, including changes in interest and currency exchange rates, illiquidity or volatility in areas where we have concentrated credit risk, and a failure in or breach of our operational or security systems or infrastructure. Intercompany arrangements we have entered into in connection with our resolution planning could restrict the amount of funding available to us from our subsidiaries under certain adverse conditions, as described above under “—A resolution under our single point of entry resolution strategy could materially adversely affect our liquidity and financial condition and our ability to pay our obligations on our securities.” These restrictions could prevent those subsidiaries from paying dividends or making other distributions to us or otherwise providing funds to us that we need in order to pay dividends or make payments on our securities. Also, our right to participate in any distribution of assets of any of our subsidiaries upon such subsidiary’s liquidation or otherwise will be subject to the prior claims of creditors of that subsidiary, except to the extent that any of our claims as a creditor of such subsidiary may be recognized.

We cannot assure you that a trading market for your securities will ever develop or be maintained.

We may not list our securities on any securities exchange. We cannot predict how these securities will trade in the secondary market or whether that market will be liquid or illiquid. The number of potential buyers of our securities in any secondary market may be limited. Although any underwriters or agents may purchase and sell our securities in the secondary market from time to time, these underwriters or agents will not be obligated to do so and may discontinue making a market for the securities at any time without giving us notice. We cannot assure you that a secondary market for any of our securities will develop, or that if one develops, it will be maintained.

Payments on the securities are subject to our credit risk, and actual or perceived changes in our creditworthiness may affect the value of our securities.

Our credit ratings are an assessment of our ability to pay our obligations. Consequently, our perceived creditworthiness and actual or anticipated changes in our credit ratings may affect the market value of our securities. However, because the return on our securities generally depends upon factors in addition to our ability to pay our obligations, an improvement in our credit ratings will not reduce the other investment risks, if any, related to our securities.

Currency Risks

We may issue securities denominated in or whose principal, interest and/or other amounts payable are payable in a currency other than U.S. dollars, which we refer to as “Non-U.S. Dollar-Denominated Securities.” If you intend to invest in any Non-U.S. Dollar-Denominated Securities, you should consult your own financial and legal advisors as to the currency risks related to your investment. The Non-U.S. Dollar-Denominated Securities are not an appropriate investment for you if you are not knowledgeable about the significant terms and conditions of the Non-U.S. Dollar-Denominated Securities, non-U.S. dollar currency transactions, or financial matters in general. The

 

16


Table of Contents

information in this prospectus is directed primarily to investors who are U.S. residents. Investors who are not U.S. residents should consult their own financial and legal advisors about currency-related risks arising from their investment.

An investment in a Non-U.S. Dollar-Denominated Security involves currency-related risks.

An investment in a Non-U.S. Dollar-Denominated Security entails significant risks that are not associated with a similar investment in a security that is payable solely in U.S. dollars. These risks include possible significant changes in rates of exchange between the U.S. dollar and the relevant non-U.S. dollar currency or currencies and the imposition or modification of foreign exchange controls or other conditions by either the United States or non-U.S. governments. These risks generally depend on factors over which we have no control, such as economic and political events and the supply of and demand for the relevant currencies in the global markets.

Changes in currency exchange rates can be volatile and may adversely affect an investment in Non-U.S. Dollar-Denominated Securities.

In recent years, exchange rates between the U.S. dollar and a number of other currencies have been highly volatile. This volatility may continue and could spread to other currencies in the future. Fluctuations in currency exchange rates could affect adversely an investment in a Non-U.S. Dollar-Denominated Security, and such changes in exchange rates may vary considerably during the life of that security. Depreciation of the specified currency against the U.S. dollar could result in a decrease in the U.S. dollar-equivalent value of payments on the Non-U.S. Dollar-Denominated Securities, including the principal or other amounts payable at maturity or the redemption amount payable upon those securities. That in turn could cause the market value of the Non-U.S. Dollar-Denominated Securities to fall.

We will not adjust Non-U.S. Dollar-Denominated Securities to compensate for changes in foreign currency exchange rates.

Except as described below or in the applicable supplement, we will not make any adjustment in or change to the terms of the Non-U.S. Dollar-Denominated Securities for changes in the foreign currency exchange rate for the relevant currency, including any devaluation, revaluation, or imposition of exchange or other regulatory controls or taxes, or for other developments affecting that currency, the U.S. dollar, or any other currency. Consequently, you will bear the risk that your investment may be affected adversely by these types of events.

Government policy can adversely affect foreign currency exchange rates and an investment in a Non-U.S. Dollar-Denominated Security.

Foreign currency exchange rates either can float or be fixed by sovereign governments. Governments or governmental bodies, including the European Central Bank, may intervene from time to time in their economies to alter the exchange rate or exchange characteristics of their currencies. For example, a central bank may intervene to devalue or revalue a currency or to replace an existing currency. In addition, a government may impose regulatory controls or taxes to affect the exchange rate of its currency or may issue a new currency or replace an existing currency. As a result, the amounts payable on and rate of return of a Non-U.S. Dollar-Denominated Security could be affected significantly and unpredictably by governmental actions. Even in the absence of governmental action directly affecting currency exchange rates, political or economic

 

17


Table of Contents

developments in the country or region issuing the specified currency for a Non-U.S. Dollar-Denominated Security or elsewhere could result in significant and sudden changes in the exchange rate between the U.S. dollar and the specified currency. Changes in exchange rates could affect the value of the Non-U.S. Dollar-Denominated Securities as participants in the global currency markets move to buy or sell the specified currency or U.S. dollars in reaction to these developments.

If a governmental authority imposes exchange controls or other conditions, such as taxes on the exchange or transfer of the specified currency, there may be limited availability of the specified currency for payment on the Non-U.S. Dollar-Denominated Securities at their maturity or on any other payment date. In addition, the ability of a holder to move currency freely out of the country in which payment in the currency is received or to convert the currency at a freely determined market rate could be limited by governmental actions.

Non-U.S. Dollar-Denominated Securities may permit us to make payments in U.S. dollars if we are unable to obtain the specified currency.

The terms of any Non-U.S. Dollar-Denominated Securities may provide that we may have the right to make a payment in U.S. dollars instead of the specified currency, if at or about the time when the payment on the Non-U.S. Dollar-Denominated Securities comes due, the specified currency is subject to convertibility, transferability, market disruption, or other conditions affecting its availability because of circumstances beyond our control, including the imposition of exchange controls, our inability to obtain the specified currency because of a disruption in the currency markets for the specified currency, or unavailability because the specified currency is no longer used by the government of the relevant country or for settlement of transactions by public institutions of or within the international banking community. In addition, if the specified currency for a debt security has been replaced by a new currency, we may have the option to choose whether we make payments on such debt security in the replacement currency or in U.S. dollars. In either case, the exchange rate used to make payment in U.S. dollars or the replacement currency, if any, may be based on limited information and would involve significant discretion on the part of the exchange rate agent, which may be one of our affiliates, to be appointed by us. As a result, the value of the payment in U.S. dollars may be less than the value of the payment you would have received in the specified currency if the specified currency had been available. The exchange rate agent generally will not have any liability for its determinations.

An investor may bear foreign currency exchange risk in a lawsuit for payment on Non-U.S. Dollar-Denominated Securities.

Any Non-U.S. Dollar-Denominated Securities typically will be governed by New York law. Under Section 27 of the New York Judiciary Law, a state court in the State of New York rendering a judgment on the Non-U.S. Dollar-Denominated Debt Securities would be required to render the judgment in the specified currency. In turn, the judgment would be converted into U.S. dollars at the exchange rate prevailing on the date of entry of the judgment. Consequently, in a lawsuit for payment on the Non-U.S. Dollar-Denominated Securities, you would bear currency exchange risk until judgment is entered, which could be a long time.

In courts outside of New York, you may not be able to obtain judgment in a specified currency other than U.S. dollars. For example, a judgment for money in an action based on Non-U.S. Dollar-Denominated Securities in many other U.S. federal or state courts ordinarily would be enforced in the United States only in U.S. dollars. The date and method used to determine the rate of conversion of the specified currency into U.S. dollars will depend on various factors, including which court renders the judgment.

 

18


Table of Contents

Information about foreign currency exchange rates may not be indicative of future performance.

If we issue a Non-U.S. Dollar-Denominated Security, we may include in the applicable supplement information about historical exchange rates for the relevant non-U.S. dollar currency or currencies. Any information about exchange rates that we may provide will be furnished as a matter of information only, and you should not regard the information as indicative of the range of, or trends in, fluctuations in currency exchange rates that may occur in the future.

 

19


Table of Contents

BANK OF AMERICA CORPORATION

Bank of America Corporation is a Delaware corporation, a bank holding company, and a financial holding company. Our principal executive offices are located in the Bank of America Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255 and our telephone number is (704) 386-5681. Through our banking and various nonbank subsidiaries throughout the United States and in international markets, we provide a diversified range of banking and nonbank financial services and products.

USE OF PROCEEDS

Unless we describe a different use in the applicable supplement, we will use the net proceeds from the sale of the securities for general corporate purposes. General corporate purposes include, but are not limited to, the following:

 

   

our working capital needs;

 

   

the funding of investments in, or extensions of credit to, our subsidiaries;

 

   

possible reductions, redemptions, repayments or repurchases of outstanding indebtedness or equity securities;

 

   

the possible acquisitions of, or investments in, other financial institutions or other businesses; and

 

   

other uses in the ordinary course of conducting our business.

Until we designate the use of these net proceeds, we will invest them temporarily. From time to time, we may engage in additional financings as we determine appropriate based on our needs and prevailing market conditions. These additional financings may include the sale of other securities.

 

20


Table of Contents

DESCRIPTION OF DEBT SECURITIES

General

We may issue senior or subordinated debt securities. Neither the senior debt securities nor the subordinated debt securities will be secured by any of our property or assets. As a result, by owning a debt security, you are one of our unsecured creditors.

The senior debt securities will constitute part of our senior debt, will be issued under our senior debt indentures described below, and will rank equally in right of payment with all of our other unsecured and unsubordinated debt from time to time outstanding, except obligations, including deposit liabilities, that are subject to any priorities or preferences by law.

The subordinated debt securities will constitute part of our subordinated debt, will be issued under our subordinated debt indentures described below, and will be subordinated and junior in right of payment to all of our “senior indebtedness,” as defined in the subordinated debt indentures, from time to time outstanding to the extent and in the manner provided in the subordinated debt indentures. The subordinated debt securities will rank equally in right of payment with all our other unsecured and subordinated indebtedness, other than unsecured and subordinated indebtedness that by its terms is subordinated to the subordinated debt securities. Neither the senior debt indentures nor the subordinated debt indentures limit our ability to incur additional “senior indebtedness.”

This section of the prospectus provides a summary of the material terms of the 2018 Indentures (as defined below) and the 1995 Indentures (as defined below) and certain specific terms of debt securities that may be applicable if so specified in the applicable supplement for such debt securities. Where applicable, this section also describes material differences between the terms of the 2018 Indentures and the 1995 Indentures and certain specific terms of the debt securities issued thereunder. Unless otherwise indicated, the descriptions in this section apply to debt securities issued under either of the 2018 Indentures and either of the 1995 Indentures.

Financial Consequences to Unsecured Debtholders of Single Point of Entry Resolution Strategy

Beginning January 1, 2019, we will be required to be in full compliance with the TLAC Rules, which aim to improve the resiliency and resolvability of U.S. global systemically important bank holding companies (“covered BHCs”), including Bank of America, in the event of failure or material financial distress. The TLAC Rules include the requirement that each covered BHC maintain a minimum amount of eligible LTD and other loss-absorbing capacity. The eligible LTD would absorb the covered BHC’s losses, following the depletion of its equity, upon its entry into a resolution proceeding under the U.S. Bankruptcy Code or a resolution proceeding administered by the FDIC under Title II of the Financial Reform Act.

Under Title I of the Financial Reform Act, we are required by the Federal Reserve and the FDIC to periodically submit a plan for a rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure. Our preferred resolution strategy under this plan is our SPOE strategy under which only Bank of America would enter bankruptcy proceedings. Under this strategy, and pursuant to existing intercompany arrangements which we have transferred most of our assets to a wholly-owned holding company subsidiary, which holds the equity interests in our key operating subsidiaries, we would contribute our remaining financial assets, less a holdback to cover our bankruptcy expenses, to this wholly-owned holding company subsidiary prior to filing for bankruptcy. We would then file for bankruptcy under Chapter 11 of the

 

21


Table of Contents

U.S. Bankruptcy Code. Pursuant to an order from the bankruptcy court under section 363 of the Bankruptcy Code, we, as debtor-in-possession, would transfer our subsidiaries to a newly-formed entity (“NewCo”) that would be held in trust for the sole and exclusive benefit of our bankruptcy estate.

Under our SPOE resolution strategy, the obligations of Bank of America on its unsecured debt, including the debt securities offered pursuant to this prospectus, would not be assumed by NewCo; instead, the claims on such obligations would be left behind in the bankruptcy proceeding. After the transferred subsidiaries were stabilized, NewCo’s residual value in the form of shares or proceeds from the sale of shares would be distributed to the holders of claims against the bankruptcy estate in accordance with the priority of their claims, including to holders of our debt securities.

In 2013, the FDIC issued a notice describing its similar preferred “single point of entry” recapitalization model for resolving a global systemically important banking group, such as Bank of America, under Title II of the Financial Reform Act. Under Title II, when a covered BHC is in default or danger of default, the FDIC may be appointed receiver in order to conduct an orderly liquidation of such institution as an alternative to resolution of the entity under the U.S. Bankruptcy Code. Pursuant to the single point of entry recapitalization model, the FDIC would use its power to create a “bridge entity” for the covered BHC; transfer the systemically important and viable parts of the covered BHC’s business to the bridge entity; recapitalize those subsidiaries using assets of the covered BHC that have been transferred to the bridge entity; and exchange external debt claims against the covered BHC, including claims of holders of our debt securities and other unsecured debt, for equity in the bridge entity. This strategy would allow operating subsidiaries of the covered BHC to continue to operate and impose losses on stockholders and creditors of the covered BHC.

The Indentures

The senior debt securities and the subordinated debt securities each are governed by a document called an indenture, which is a contract between us and the applicable trustee. Senior debt securities will be issued under the Indenture dated as of June 27, 2018 (for senior debt securities) (as supplemented from time to time, the “2018 Senior Indenture”) between us, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, and subordinated debt securities will be issued under the Indenture dated as of June 27, 2018 (for subordinated debt securities) (as supplemented from time to time, the “2018 Subordinated Indenture” and, together with the 2018 Senior Indenture, the “2018 Indentures”) between us, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee. These indentures are substantially identical in all material respects, except for:

 

   

the covenant described below under “—Sale or Issuance of Capital Stock of Banks,” which is included only in the 2018 Senior Indenture;

 

   

the provisions relating to subordination described below under “—Subordination,” which are included only in the 2018 Subordinated Indenture; and

 

   

the events of default relating to payment defaults and specific provisions for covenant breaches, as described below under “—Events of Default and Rights of Acceleration; Covenant Breaches,” which are not included in the 2018 Subordinated Indenture.

We have previously issued senior debt securities under the Indenture for senior debt securities dated as of January 1, 1995 (as supplemented, the “1995 Senior Indenture”) between us, as issuer, and The Bank of New York Mellon Trust Company, N.A., as successor trustee, and subordinated

 

22


Table of Contents

debt securities under the Indenture for subordinated debt securities dated as of January 1, 1995 (as supplemented, the “1995 Subordinated Indenture” and, together with the 1995 Senior Indenture, the “1995 Indentures”) between us, as issuer, and The Bank of New York Mellon Trust Company, N.A., as successor trustee. In addition to debt securities that we may issue under the 2018 Indentures, as described below under “—Different Series of Debt Securities,” we may “reopen,” or increase the principal amount of, a series of debt securities previously issued under either of the 1995 Indentures by selling additional debt securities with the same terms; provided, however, that we will reopen a series of senior debt securities issued under the 1995 Senior Indenture only if the debt securities of such series were first issued on or after January 13, 2017. We refer to the 2018 Senior Indenture and the 1995 Senior Indenture each as a “Senior Indenture” and, together, as the “Senior Indentures” and refer to the 2018 Subordinated Indenture and the 1995 Subordinated Indenture each as a “Subordinated Indenture” and, together, as the “Subordinated Indentures.”

In this prospectus, when we refer to “debt securities,” we mean both our senior debt securities and our subordinated debt securities, and when we refer to the “indenture” or the “trustee” with respect to any debt securities, we mean the indenture under which those debt securities are issued and the trustee under that indenture.

The trustee under each indenture has two principal functions:

 

   

First, the trustee can enforce your rights against us if we default. However, there are limitations on the extent to which the trustee may act on your behalf, which we describe below under “—Collection of Indebtedness and Suits for Enforcement by Trustee.”

 

   

Second, the trustee performs administrative duties for us, including the delivery of interest payments and notices.

None of the indentures limits the aggregate amount of debt securities that we may issue or the number of series or the aggregate amount of any particular series of debt securities. The indentures and the debt securities also do not limit our ability to incur other indebtedness or to issue other securities. This means that we may issue additional debt securities and other securities at any time without your consent and without notifying you. In addition, none of the indentures contains provisions protecting holders against a decline in our credit quality resulting from takeovers, recapitalizations, the incurrence of additional indebtedness, or restructuring. If our credit quality declines as a result of an event of this type, or otherwise, any ratings of our debt securities then outstanding may be withdrawn or downgraded.

This section is a summary of the general terms and provisions of the indentures. We have filed the 1995 Indentures and the 2018 Indentures with the SEC as exhibits to the registration statement of which this prospectus forms a part. See “Where You Can Find More Information” below for information on how to obtain copies of the indentures. Whenever we refer to the defined terms of an indenture in this prospectus or in a supplement hereto without defining them, the terms have the meanings given to them in that indenture. You must look to the indentures for the most complete description of the information summarized in this prospectus.

Form and Denomination of Debt Securities

Unless we specify otherwise in the applicable supplement, we will issue each debt security in book-entry only form. Debt securities in book-entry only form will be represented by a global security registered in the name of a depository. Accordingly, the depository will be the registered holder of all the debt securities represented by the global security. Those who own beneficial

 

23


Table of Contents

interests in a global security will do so through participants in the depository’s securities clearing system, and the rights of these indirect owners will be governed solely by the applicable procedures of the depository and its participants. We describe the procedures applicable to book-entry only securities below under the heading “Registration and Settlement.”

Generally, all debt securities represented by the same global security will have the same terms. We may, however, issue a global security that represents multiple debt securities that have different terms and are issued at different times. We call this kind of global security a master global security. Your debt securities will not be represented by a master global security unless we so specify in the applicable supplement.

Unless we specify otherwise in the applicable supplement, we will issue our debt securities in fully registered form, without coupons. If we issue a debt security in bearer form, we will describe the special considerations applicable to bearer securities in the applicable supplement. Some of the features that we describe in this prospectus may not apply to bearer securities.

Our debt securities may be denominated, and cash payments with respect to the debt securities may be made, in U.S. dollars or in another currency. Unless we specify otherwise in the applicable supplement, the debt securities will be denominated, and cash payments with respect to the debt securities will be made, in U.S. dollars, and the debt securities ordinarily will be issued in denominations of $1,000 and multiples of $1,000 in excess of $1,000. If any of the debt securities are denominated, or if principal, any premium, interest, and any other amounts payable on any of the debt securities is payable, in a foreign currency, the specified currency, as well as any additional investment considerations, risk factors, restrictions, tax consequences, specific terms and other information relating to that series of debt securities and the specified currency will be described in the applicable supplement. We describe some of those investment considerations relating to securities denominated or payable in a currency other than U.S. dollars above under the heading “Risk Factors.”

Different Series of Debt Securities

We may issue our debt securities from time to time in one or more series with the same or different maturities. We also may “reopen” a series of our debt securities, including a series of our debt securities originally issued under one of the 1995 Indentures (provided, however, that we will reopen a series of debt securities issued under the 1995 Senior Indenture only if the debt securities of such series were first issued on or after January 13, 2017). This means that we can increase the principal amount of a series of our debt securities by selling additional debt securities with the same terms, provided that such additional debt securities shall be fungible for U.S. federal income tax purposes. We may do so without notice to the existing holders of debt securities of that series. However, any new debt securities of this kind may begin to bear interest at a different date.

This section of the prospectus summarizes the material terms of the debt securities that are common to all series under the respective indentures. We will describe the financial and other specific terms of the series of debt securities being offered in the applicable supplement. The applicable supplement also may describe any differences from the material terms described in this prospectus. If there are any differences between the applicable supplement and this prospectus, the applicable supplement will control.

The terms of your series of debt securities as described in the applicable supplement may include the following:

 

   

the title and type of the debt securities;

 

24


Table of Contents
   

the principal amount of the debt securities;

 

   

the minimum denominations, if other than $1,000 and multiples of $1,000 in excess of $1,000;

 

   

the percentage of the stated principal amount at which the debt securities will be sold and, if applicable, the method of determining the price;

 

   

the person to whom interest is payable, if other than the owner of the debt securities;

 

   

the maturity date or dates;

 

   

the interest rate or rates, which may be fixed or floating, and the method used to calculate that interest;

 

   

the base rate that will be used to determine the amounts of any payments on floating rate debt securities;

 

   

the interest payment dates, the regular record dates for the interest payment dates, the dates from which interest will begin to accrue, and the applicable business day convention;

 

   

the place or places where payments on the debt securities may be made and the place or places where the debt securities may be presented for registration of transfer or exchange;

 

   

any date or dates after which the debt securities may be redeemed, repurchased, or repaid in whole or in part at our option or the option of the holder, and the periods, prices, terms, and conditions of that redemption, repurchase, or repayment;

 

   

if other than the full principal amount, the portion of the principal amount of the debt securities that will be payable if their maturity is accelerated;

 

   

the currency of principal, any premium, interest and any other amounts payable on the debt securities, if other than U.S. dollars;

 

   

if the debt securities will be issued in other than book-entry only form;

 

   

the identification of or method of selecting any calculation agents, exchange rate agents, or any other agents for the debt securities;

 

   

any provisions for the discharge of our obligations relating to the debt securities by the deposit of funds or U.S. government obligations;

 

   

any provisions relating to the extension or renewal of the maturity date of the debt securities;

 

   

if the debt securities will be represented by a master global security;

 

   

if the debt securities will be listed on any securities exchange; or

 

   

any other terms of the debt securities that are permitted under the applicable indenture.

 

25


Table of Contents

Fixed-Rate Notes

General.  We may issue debt securities that bear interest at one or more fixed rates of interest, as specified in the applicable supplement. We refer to these as “fixed-rate notes.” Unless we specify otherwise in the applicable supplement, each fixed-rate note will bear interest from its original issue date or from the most recent date to which interest on the fixed-rate note has been paid or made available for payment. Interest will accrue on the principal of a fixed-rate note at the fixed annual rate stated in the applicable supplement, until the principal is paid or made available for payment or the fixed-rate note is converted or exchanged.

Unless we specify otherwise in the applicable supplement, we will pay interest on any fixed-rate note quarterly, semi-annually, or annually, as applicable, in arrears, on the dates set forth in the applicable supplement (each such day being an “interest payment date” for a fixed-rate note) and at maturity. Each interest payment due on an interest payment date or the maturity date will include interest accrued from, and including, the most recent interest payment date to which interest has been paid, or, if no interest has been paid, from the original issue date, to, but excluding, the next interest payment date or the maturity date, as the case may be. Unless we specify otherwise in the applicable supplement, (a) interest on U.S. dollar-denominated fixed-rate notes will be computed and paid on the basis of a 360-day year consisting of twelve 30-day months, which we may refer to as the “30/360” day count convention, (b) interest on Australian dollar-denominated fixed-rate notes will be calculated on the basis of the actual number of days elapsed and the actual number of days in the year, which we may refer to as the “Actual/Actual” day count convention and (c) interest on Canadian dollar-denominated fixed-rate notes will be computed and paid on the basis of (i) the 30/360 day count convention when calculating interest for a full semi-annual interest period and (ii) the actual number of days in the relevant period divided by 365, when calculating interest for any period that is shorter than a full semi-annual interest period, which we may refer to as the “Actual/Actual (Canadian Compound Method)” day count convention. We will make payments on fixed-rate notes as described below under the heading “—Payment of Principal, Interest, and Other Amounts Payable.”

Amortizing Notes.  We also may issue “amortizing notes,” which are fixed-rate notes for which combined principal and interest payments are made in installments over the life of the debt security. Payments on amortizing notes are applied first to interest due and then to the reduction of the unpaid principal amount. The supplement for an amortizing note will include a table setting forth repayment information.

Floating-Rate Notes

General.  We may issue debt securities that will bear interest at a floating rate of interest determined by reference to one or more interest rate bases, referred to as the “base rate,” or by reference to one or more interest rate formulae. We refer to these debt securities as “floating-rate notes.” The base rate may be one or more of the following:

 

   

the federal funds rate, in which case the debt security will be a “federal funds rate note”;

 

   

the London interbank offered rate, in which case the debt security will be a “LIBOR note”;

 

   

the euro interbank offered rate, in which case the debt security will be a “EURIBOR note”;

 

   

the Canadian dollar Bankers’ Acceptance Rate, or CDOR, in which case the debt security will be a “CDOR note”;

 

   

the prime rate, in which case the debt security will be a “prime rate note”;

 

26


Table of Contents
   

the treasury rate, in which case the debt security will be a “treasury rate note”;

 

   

the Australian dollar Bank Bill Swap Reference Rate, in which case the debt security will be a “BBSW Rate Note”; or

 

   

any other interest rate formula as may be specified in the applicable supplement.

The interest rate for a floating-rate note will be determined by reference to:

 

   

the specified base rate based on the index maturity;

 

   

plus or minus the spread, if any; and/or

 

   

multiplied by the spread multiplier, if any.

For any floating-rate note, the “index maturity” is the period to maturity of the instrument for which the base rate is calculated and will be specified in the applicable supplement. The “spread” is the number of basis points we specify on the floating-rate note to be added to or subtracted from the base rate. The “spread multiplier” is the percentage we may specify on the floating-rate note by which the base rate is multiplied in order to calculate the applicable interest rate.

A floating-rate note also may be subject to:

 

   

a maximum interest rate limit, or ceiling, on the interest that may accrue during any interest period;

 

   

a minimum interest rate limit, or floor, on the interest that may accrue during any interest period; or

 

   

both.

In addition, the interest rate on a floating-rate note may not be higher than the maximum rate permitted by New York law, as that rate may be modified by United States law of general application. Under current New York law, the maximum rate of interest, subject to some exceptions, for any loan in an amount less than $250,000 is 16% and for any loan in the amount of $250,000 or more but less than $2,500,000 is 25% per annum on a simple interest basis. These limits do not apply to loans of $2,500,000 or more to any one borrower.

Unless we specify otherwise in the applicable supplement, each floating-rate note will bear interest from its original issue date or from the most recent date to which interest on the floating-rate note has been paid or made available for payment. Interest will accrue on the principal of a floating-rate note at the annual rate determined according to the interest rate formula stated in the applicable supplement, until the principal is paid or made available for payment or the floating-rate note is converted or exchanged. Unless we specify otherwise in the applicable supplement, we will pay interest on any floating-rate note monthly, quarterly, semi-annually, or annually, as applicable, in arrears, on the dates set forth in the applicable supplement (each such day being an “interest payment date” for a floating-rate note) and at maturity. Unless we specify otherwise in the applicable supplement, each interest payment due on an interest payment date or the maturity date will include interest accrued from, and including, the most recent interest payment date to which interest has been paid, or, if no interest has been paid, from the original issue date, to, but excluding, the next interest payment date or the maturity date, as the case may be (each such period, an “interest period”). Interest payment dates and interest periods may be adjusted in accordance with the business day convention (as described below under “—Payment of Principal,

 

27


Table of Contents

Interest, and Other Amounts Payable—Business Day Conventions”) specified in the applicable supplement. We will make payments on floating-rate notes as described below under the heading “—Payment of Principal, Interest, and Other Amounts Payable.”

How Interest Is Reset.  The interest rate in effect from the date of issue to the first interest reset date for a floating-rate note will be the initial interest rate determined as described in the applicable supplement. The interest rate of each floating-rate note may be reset daily, weekly, monthly, quarterly, semi-annually, or annually, as we specify in the applicable supplement. We refer to each date on which the interest rate for a floating-rate note will reset as an “interest reset date.”

The “interest determination date” for any interest reset date is the day the calculation agent will refer to when determining the new interest rate at which a floating rate will reset. Unless we specify otherwise in the applicable supplement, the interest determination date for an interest reset date will be:

 

   

for a federal funds rate note or a prime rate note, the business day immediately preceding the interest reset date;

 

   

for a LIBOR note, the second London Banking Day (as defined below) preceding the interest reset date unless the index currency is pounds sterling, in which case the interest determination date will be the interest reset date;

 

   

for a EURIBOR note, the second TARGET Settlement Date (as defined below) preceding the interest reset date;

 

   

for a CDOR note, the first Toronto Banking Day (as defined below) of the relevant interest period;

 

   

for a treasury rate note, the day of the week in which the interest reset date falls on which Treasury bills (as described below) of the applicable index maturity would normally be auctioned;

 

   

for a BBSW Rate Note, the first day of the relevant interest period; and

 

   

for a floating-rate note with two or more base rates, the interest determination date will be the most recent business day that is at least two business days prior to the applicable interest reset date on which each applicable base rate is determinable.

Treasury bills usually are sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction usually is held on the following Tuesday, except that the auction may be held on the preceding Friday. If, as a result of a legal holiday, an auction is held on the preceding Friday, that preceding Friday will be the interest determination date pertaining to the interest reset date occurring in the next succeeding week. The treasury rate will be determined as of that date, and the applicable interest rate will take effect on the applicable interest reset date. If Treasury bills are sold at an auction that falls on a day that is an interest reset date, that interest reset date will be the next following business day unless we specify otherwise in the applicable supplement.

We will specify the interest reset dates in the applicable supplement. Interest reset dates may be adjusted in accordance with the business day convention (as described below under “—Payment of Principal, Interest, and Other Amounts Payable—Business Day Conventions”) specified in the applicable supplement.

 

28


Table of Contents

Calculation of Interest.  Calculations relating to floating-rate notes will be made by the applicable calculation agent, which will be an institution that we appoint as our agent for this purpose. The calculation agent may be one of our affiliates and may also be The Bank of New York Mellon Trust Company, N.A. We will identify in the applicable supplement the calculation agent we have appointed for a particular series of debt securities as of its original issue date. We may appoint different calculation agents from time to time after the original issue date of a floating-rate note without your consent and without notifying you of the change. Absent manifest error, all determinations of the calculation agent will be final and binding on you, the trustee and us.

For each floating-rate note, the calculation agent will determine, on the corresponding interest determination date, the interest rate for the applicable interest period. In addition, on the relevant calculation date, the calculation agent will calculate the amount of interest that has accrued during each interest period. Unless we specify otherwise in the applicable supplement, the calculation date for any interest determination date will be the date by which the calculation agent computes the amount of interest owed on a floating-rate note for the related interest period. Unless we specify otherwise in the applicable supplement, the calculation date pertaining to an interest determination date will be the earlier of:

 

   

the tenth calendar day after that interest determination date or, if that day is not a business day, the next succeeding business day; or

 

   

the business day immediately preceding the applicable interest payment date, the maturity date, or the date of redemption or prepayment, as the case may be.

Accrued interest on a floating-rate note is calculated by multiplying the principal amount by an accrued interest factor. This accrued interest factor is the sum of the interest factors calculated for each day in the period for which accrued interest is being calculated. Unless we specify otherwise in the applicable supplement, the daily interest factor will be computed on the basis of:

 

   

a 360-day year of twelve 30-day months if the day count convention specified in the applicable supplement is “30/360”;

 

   

the actual number of days in the relevant period divided by 360 if the day count convention specified in the applicable supplement is “Actual/360”;

 

   

the actual number of days in the relevant period divided by 365, or if any portion of that relevant period falls in a leap year, the sum of (A) the actual number of days in that portion of the relevant period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the relevant period falling in a non-leap year divided by 365, if the day count convention specified in the applicable supplement is “Actual/Actual”; or

 

   

the actual number of days in the relevant period divided by 365, if the day count convention specified in the applicable supplement is “Actual/365 (Fixed).”

If no day count convention is specified in the applicable supplement, the daily interest factor will be computed and interest will be paid (including payments for partial periods) as follows:

 

   

for federal funds rate notes, LIBOR notes, EURIBOR notes, prime rate notes, or any other floating-rate notes other than treasury rate notes, CDOR notes and BBSW Rate Notes, on the basis of the actual number of days in the relevant period divided by 360;

 

   

for treasury rate notes, on the basis of the actual number of days in the relevant period divided by 365 or 366, as applicable; and

 

29


Table of Contents
   

for CDOR notes and BBSW Rate Notes, on the basis of the actual number of days in the relevant period divided by 365.

All amounts used in or resulting from any calculation on floating-rate notes will be rounded to the nearest cent, in the case of U.S. dollars, or to the nearest corresponding hundredth of a unit, in the case of a currency other than U.S. dollars, with one-half cent or one-half of a corresponding hundredth of a unit or more being rounded upward. Unless we specify otherwise in the applicable supplement, all percentages resulting from any calculation with respect to a floating-rate note will be rounded, if necessary, to the nearest one hundred-thousandth of a percent, with five one-millionths of a percentage point rounded upwards, e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655).

In determining the base rate that applies to a floating-rate note during a particular interest period, the calculation agent may obtain rate quotes from various banks or dealers active in the relevant market, as described in the descriptions of the base rates below and/or in the applicable supplement. Those reference banks and dealers may include the calculation agent itself and its affiliates, as well as any underwriter, dealer or agent participating in the distribution of the relevant floating-rate notes and its affiliates, and they may include our affiliates.

At the request of the holder of any floating-rate note, the calculation agent will provide the interest rate then in effect for that floating-rate note and, if already determined, the interest rate that is to take effect on the next interest reset date.

LIBOR Notes.  Each LIBOR note will bear interest at the LIBOR base rate, adjusted by any spread or spread multiplier, as specified in the applicable supplement. The LIBOR base rate will be the London interbank offered rate for deposits in U.S. dollars or other index currency, as specified in the applicable supplement.

LIBOR for any interest determination date will be the arithmetic mean of the offered rates for deposits in the relevant index currency having the index maturity described in the applicable supplement, commencing on the related interest reset date, as the rates appear on the Designated LIBOR Page designated in the applicable supplement as of 11:00 A.M., London time, on that interest determination date, if at least two offered rates appear on the Designated LIBOR Page, except that, if the Designated LIBOR Page only provides for a single rate, that single rate will be used. If fewer than two of the rates described above appear on that page or no rate appears on any page on which only one rate normally appears, then the calculation agent will determine LIBOR as follows:

 

   

The calculation agent will request on the interest determination date four major banks in the London interbank market, as selected and identified by us, to provide their offered quotations for deposits in a representative amount in the relevant index currency having an index maturity specified in the applicable supplement commencing on the interest reset date to prime banks in the London interbank market at approximately 11:00 A.M., London time.

 

   

If at least two quotations are provided, the calculation agent will determine LIBOR as the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of those quotations.

 

   

If fewer than two quotations are provided, we will select and identify to the calculation agent three major banks in New York City, or if the relevant index currency is not U.S. dollars, the principal financial center of the country issuing the index currency. On the interest reset date, those three banks will be requested by the calculation agent to provide

 

30


Table of Contents
 

their offered quotations for loans in the relevant index currency having an index maturity specified in the applicable supplement commencing on the interest reset date and in a representative amount to leading European banks at approximately 11:00 A.M., New York time (or the time in the relevant principal financial center). If three quotations are provided, the calculation agent will determine LIBOR as the arithmetic mean of those quotations.

 

   

If fewer than three New York City banks (or banks in the relevant principal financial center) selected by us are quoting rates, LIBOR for the applicable interest period will be equal to LIBOR in effect for the then-current interest period or, if LIBOR is not applicable to the then-current interest period (for example because the note bears interest at a fixed rate for the then-current interest period), the most recent rate that could have been determined in accordance with the second paragraph of this section entitled “—LIBOR Notes.”

Notwithstanding the foregoing, if the calculation agent determines on or prior to the relevant interest determination date, after consultation with us, that LIBOR has been discontinued, then we will appoint in our sole discretion an investment bank of national standing, which may be our affiliate, to determine whether there is a substitute or successor base rate to LIBOR that is consistent with accepted market practice. If such investment bank of national standing determines that there is such a substitute or successor base rate, the calculation agent shall use such substitute or successor base rate. In such case, the calculation agent will implement changes to the business day convention, the definition of business day, the interest determination date and any method for obtaining the substitute or successor base rate if such rate is unavailable on the relevant business day, in a manner that is consistent with industry accepted practices for such substitute or successor base rate, all as directed by the investment bank of national standing. If the investment bank of national standing determines that there is no such substitute or successor base rate as so provided above, LIBOR for the applicable interest period will be determined in accordance with the steps provided in the immediately preceding paragraph.

The determination of LIBOR for certain LIBOR notes reopened under either of the 1995 Indentures may differ from the provisions described above, in which case the applicable supplement will describe the method by which LIBOR will be determined for such notes.

“Representative amount” means, unless we specify otherwise in the applicable supplement, in the case of a LIBOR note where the index currency is U.S. dollars, $1,000,000 and, in the case of LIBOR notes where the index currency is a currency other than U.S. dollars, an amount that, in our judgment, is representative of a single transaction in the relevant market at the relevant time.

“Designated LIBOR Page” means the display on the Thomson Reuters Eikon service, or any successor or replacement service (“Reuters”), on page LIBOR01, or such other page as designated in the applicable supplement, for the purpose of displaying the London interbank rates of major banks for the applicable index currency, or any successor or replacement page or pages on that service.

EURIBOR Notes.  Each EURIBOR note will bear interest at the EURIBOR base rate, adjusted by any spread or spread multiplier, as specified in the applicable supplement.

EURIBOR, for any interest determination date, will mean the rate for deposits in euro as sponsored, calculated, and published jointly by the European Banking Federation and ACI-The Financial Markets Association, or any company established by the joint sponsors for purposes of compiling and publishing those rates, having the index maturity specified in the applicable supplement, as that rate appears on the Designated EURIBOR Page, as of 11:00 A.M., Brussels time.

 

31


Table of Contents

The following procedures will be followed if EURIBOR cannot be determined as described above:

 

   

If no offered rate appears on the Designated EURIBOR Page on an interest determination date at approximately 11:00 A.M., Brussels time, then the calculation agent will request four major banks in the Eurozone interbank market selected and identified by us to provide a quotation of the rate at which deposits in euro having the index maturity specified in the applicable supplement are offered to prime banks in the Eurozone interbank market, and in a principal amount not less than the equivalent of €1,000,000, that is representative of a single transaction in euro in that market at that time. If at least two quotations are provided, EURIBOR will be the average of those quotations.

 

   

If fewer than two quotations are provided, then the calculation agent will request four major banks in the Eurozone interbank market selected and identified by us to provide a quotation of the rate offered by them, at approximately 11:00 A.M., Brussels time, on the interest determination date, for loans in euro to prime banks in the Eurozone interbank market for a period of time equivalent to the index maturity specified in the applicable supplement commencing on that interest reset date and in a principal amount not less than the equivalent of €1,000,000, that is representative of a single transaction in euro in that market at that time. If at least three quotations are provided, EURIBOR will be the average of those quotations.

 

   

If three quotations are not provided, EURIBOR for that interest determination date will be equal to EURIBOR for the immediately preceding interest period.

“Designated EURIBOR Page” means the display on the page specified in the applicable supplement for the purpose of displaying the Eurozone interbank rates of major banks for the euro; provided, however, that if no such page is specified in the applicable supplement, the display on Reuters on the EURIBOR01 page (or any other page as may replace such page on such service) shall be used.

“Eurozone” means the region comprised of member states of the European Union that adopted the single currency in accordance with the Treaty establishing the European Community (signed in Rome on March 25, 1957), as amended by the Treaty on European Union (signed in Maastricht on February 7, 1992) and the Treaty of Amsterdam (signed in Amsterdam on October 2, 1997).

CDOR Notes.  Each CDOR note will bear interest at the Canadian dollar Bankers’ Acceptance Rate (“CDOR”), adjusted by any spread or spread multiplier, as specified in the applicable supplement.

CDOR, for any interest determination date, will mean the average bid rate of interest (expressed as an annual percentage rate) rounded to the nearest one-hundred-thousandth of one percent (with 0.000005 percent being rounded up) for Canadian dollar bankers’ acceptances having the index maturity specified in the applicable supplement which appears on the Reuters Screen CDOR Page, referred to as the “Reuters Screen CDOR Page,” as of 10:00 A.M., Toronto time.

If CDOR does not appear on the Reuters Screen CDOR Page on an applicable interest determination date, or if the Reuters Monitor Money Rates Service is not available or ceases to exist, CDOR for such interest determination date will be determined using an Alternative CDOR Page as of an Alternative Time on such day. If no such Alternative CDOR Page is available on such day, CDOR for such interest determination date shall be the average of the bid rates of interest (expressed and rounded as set forth above) for Canadian dollar bankers’ acceptances having the index maturity specified in the applicable supplement for same day settlement as quoted by such of

 

32


Table of Contents

the Schedule I banks (as defined in the Bank Act (Canada)) as may quote such a rate as of 10:00 a.m., Toronto time, on the applicable interest determination date.

“Reuters Screen CDOR Page” shall mean the display designated as page “CDOR” on the Reuters Monitor Money Rates Service (or such other page as may replace the CDOR page on that service) for the purpose of displaying, among other things, Canadian dollar bankers’ acceptance rates.

“Alternative CDOR Page” shall mean the display, designated as page “CDOR” on Bloomberg, or an equivalent service that displays average bid rates of interest for Canadian dollar bankers’ acceptances having the index maturity specified in the applicable supplement.

“Alternative Time,” for any Alternative CDOR Page, shall mean the time of day at which such Alternative CDOR Page becomes available.

Treasury Rate Notes.  Each treasury rate note will bear interest at the treasury rate, adjusted by any spread or spread multiplier, as specified in the applicable supplement.

The “treasury rate” for any interest determination date will be the rate set at the auction of direct obligations of the United States, referred to as “Treasury bills,” having the index maturity described in the applicable supplement, as specified under the caption “INVEST RATE” on Reuters page USAUCTION10 or page USAUCTION11.

The following procedures will be followed if the treasury rate cannot be determined as described above:

 

   

If the rate is not displayed on Reuters by 3:00 P.M., New York City time, on the related calculation date, the treasury rate will be the bond equivalent yield, as defined below, of the auction rate of the applicable Treasury bills as announced by the U.S. Department of the Treasury.

 

   

If the alternative rate described in the paragraph immediately above is not announced by the U.S. Department of the Treasury, the treasury rate will be the bond equivalent yield of the rate on the particular interest determination date of the applicable Treasury bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/Treasury Bills/Secondary Market.”

 

   

If the alternative rate described in the paragraph immediately above is not published by 5:00 P.M., New York City time, on the related calculation date, the treasury rate will be the rate on the particular interest determination date calculated by the calculation agent as the bond equivalent yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on that interest determination date, of three primary U.S. government securities dealers, selected by us, for the issue of Treasury bills with a remaining maturity closest to the particular index maturity.

 

   

If the dealers selected by us are not quoting as described in the paragraph immediately above, the treasury rate will be the treasury rate in effect on the particular interest determination date.

The bond equivalent yield will be calculated using the following formula:

 

Bond equivalent yield =   

D x N

       x 100  
   360-(D x M)

 

33


Table of Contents

where “D” refers to the applicable annual rate for Treasury bills quoted on a bank discount basis and expressed as a decimal, “N” refers to 365 or 366, as the case may be, and “M” refers to the actual number of days in the applicable interest period.

“H.15 Daily Update” means the Selected Interest Rates (Daily)—H.15 release of the Federal Reserve, available at www.federalreserve.gov/releases/h15/update, or any successor site or publication.

Federal Funds Rate Notes.  Each federal funds rate note will bear interest at the federal funds rate, adjusted by any spread or spread multiplier, as specified in the applicable supplement.

If “Federal Funds (Effective) Rate” is specified in the applicable supplement, the federal funds rate for any interest determination date will be the rate on that date for U.S. dollar federal funds, as published in H.15 Daily Update under the heading “Federal funds (effective)” and displayed on Reuters on page FEDFUNDS1 under the heading “EFFECT,” referred to as “Reuters Page FedFunds1.” If this rate is not published in H.15 Daily Update by 5:00 P.M., New York City time, on the related calculation date, or does not appear on Reuters Page FedFunds1, the federal funds rate will be the rate on that interest determination date as published in any other recognized electronic source for the purposes of displaying the applicable rate, under the caption “Federal funds (effective).” If this alternate rate is not published in another recognized electronic source for the purpose of displaying the applicable rate, by 3:00 P.M., New York City time, on the related calculation date, then the calculation agent will determine the federal funds rate to be the average of the rates for the last transaction in overnight U.S. dollar federal funds quoted prior to 9:00 A.M., New York City time, on the business day following that interest determination date, by each of three leading brokers of U.S. dollar federal funds transactions in New York City, selected by us. If fewer than three brokers selected by us are so quoting, the federal funds rate will be the federal funds rate in effect on that interest determination date.

If “Federal Funds Open Rate” is specified in the applicable supplement, the federal funds rate will be the rate on that interest determination date set forth under the heading “Federal Funds” opposite the caption “Open” and displayed on Reuters on page 5, referred to as “Reuters Page 5,” or if that rate does not appear on Reuters Page 5 by 3:00 P.M., New York City time, on the related calculation date, the federal funds rate will be the rate on that interest determination date displayed on FFPREBON Index page on Bloomberg L.P. (“Bloomberg”), which is the Fed Funds Opening Rate as reported by Prebon Yamane (or a successor) on Bloomberg. If the alternate rate described in the preceding sentence is not displayed on FFPREBON Index page on Bloomberg, or any other recognized electronic source for the purpose of displaying the applicable rate, by 3:00 P.M., New York City time, on the related calculation date, then the calculation agent will determine the federal funds rate to be the average of the rates for the last transaction in overnight U.S. dollar federal funds, quoted prior to 9:00 A.M., New York City time, on that interest determination date, by each of three leading brokers of U.S. dollar federal funds transactions in New York City, selected by us. If fewer than three brokers selected by us are quoting as described above, the federal funds rate will be the federal funds rate in effect on that interest determination date.

If “Federal Funds Target Rate” is specified in the applicable supplement, the federal funds rate will be the rate on that interest determination date for U.S. dollar federal funds displayed on the FDTR Index page on Bloomberg. If that rate does not appear on the FDTR Index page on Bloomberg by 3:00 P.M., New York City time, on the calculation date, the federal funds rate for the applicable interest determination date will be the rate for that day appearing on Reuters on page USFFTARGET=, referred to as “Reuters Page USFFTARGET=.” If that rate does not appear on the FDTR Index page on Bloomberg or is not displayed on Reuters page USFFTARGET= by 3:00 P.M., New York City time, on the related calculation date, then the calculation agent will determine the

 

34


Table of Contents

federal funds rate to be the average of the rates for the last transaction in overnight U.S. dollar federal funds, quoted prior to 9:00 A.M., New York City time, on that interest determination date, by each of three leading brokers of U.S. dollar federal funds transactions in New York City, selected by us. If fewer than three brokers selected by us are quoting as described above, the federal funds rate will be the federal funds rate in effect on that interest determination date.

Prime Rate Notes.  Each prime rate note will bear interest at the prime rate, as adjusted by any spread or spread multiplier, as specified in the applicable supplement.

The “prime rate” for any interest determination date will be the prime rate or base lending rate on that date, as published in H.15 Daily Update by 5:00 P.M., New York City time, on the related calculation date, under the heading “Bank prime loan” (or in another recognized electronic source determined by the calculation agent in its sole discretion).

The following procedures will be followed if the prime rate cannot be determined as described above:

 

   

If the rate is not published in H.15 Daily Update by 5:00 P.M., New York City time, on the related calculation date, then the prime rate will be the rate as published in any other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Bank prime loan” (or in another recognized electronic source determined by the calculation agent in its sole discretion).

 

   

If the alternative rate described above is not published in another recognized electronic source by 3:00 P.M., New York City time, on the related calculation date, then the calculation agent will determine the prime rate to be the arithmetic mean of the rates of interest publicly announced by each bank that appears on Reuters page USPRIME1, as defined below, as that bank’s prime rate or base lending rate as in effect as of 11:00 A.M., New York City time, on that interest determination date.

 

   

If fewer than four rates appear on the Reuters page USPRIME1 for that interest determination date, by 3:00 P.M., New York City time, then the calculation agent will determine the prime rate to be the average of the prime rates or base lending rates furnished in New York City by three substitute banks or trust companies (all organized under the laws of the United States or any of its states and having total equity capital of at least $500,000,000) selected by us.

 

   

If the banks selected by us are not quoting as described above, the prime rate will remain the prime rate then in effect on the interest determination date.

“Reuters page USPRIME1” means the display designated as page “USPRIME1” on Reuters for the purpose of displaying prime rates or base lending rates of major U.S. banks.

BBSW Rate Notes.  Each BBSW note will bear interest at a rate equal to the Australian dollar Bank Bill Swap Reference Rate (the “BBSW Rate”), as adjusted by any spread or spread multiplier, as specified in the applicable supplement.

The BBSW Rate, for any interest determination date, will be the rate for prime bank eligible securities having a tenor closest to the interest period which is designated as the “AVG MID” on the Reuters Screen BBSW Page at approximately 10:10 a.m., Sydney time, on as determined by the calculation agent on the interest determination date.

If the rate is not published prior to 10:30 a.m., Sydney time, on the interest determination date, or if it is displayed but the calculation agent determines that there is a manifest error in that

 

35


Table of Contents

rate, then the BBSW Rate will be the rate determined by the calculation agent having regard to comparable indices then available.

“Reuters Screen BBSW page” means the display which appears on the display on Reuters as page “BBSW” (or any other page as may replace such page), for the purpose of displaying BBSW rates or base lending rates of major Australian banks.

Fixed/Floating Rate Notes

We may issue a debt security with elements of each of the fixed-rate and floating-rate notes described above. For example, a debt security may bear interest at a fixed rate for some interest periods and at a floating rate in other interest periods. We will describe the determination of interest for any of these debt securities in the applicable supplement.

Original Issue Discount Notes

A fixed-rate note or a floating-rate note may be an original issue discount note. Original issue discount notes are debt securities that are issued at a price lower than their stated principal amount or lower than their minimum guaranteed repayment amount at maturity. Original issue discount notes may bear no interest or may bear interest at a rate that is below market rates at the time of issuance. Upon an acceleration of the maturity of an original issue discount note, the amount of interest payable will be determined in accordance with the terms of that debt security, as described in the applicable supplement. That amount normally is less than the amount payable at the maturity date. A debt security issued at a discount to its principal may, for U.S. federal income tax purposes, be considered an original issue discount note, regardless of the amount payable upon redemption or acceleration of maturity. See “U.S. Federal Income Tax Considerations—Taxation of Debt Securities” below for a summary of the U.S. federal income tax consequences of owning an original issue discount note.

Payment of Principal, Interest, and Other Amounts Payable

Paying Agents.  We may appoint one or more financial institutions to act as our paying agents. Unless we specify otherwise in the applicable supplement, the trustee will act as our sole paying agent, security registrar, and transfer agent with respect to the debt securities through the trustee’s office. That office is currently located at 10161 Centurion Parkway N., 2nd Floor, Jacksonville, Florida 32256. For debt securities originally issued under the 1995 Indentures and subsequently reopened, the trustee’s office is located at 101 Barclay Street, New York, New York 10286. At any time, we may rescind the designation of a paying agent, appoint a successor or an additional paying agent, or approve a change in the office through which any paying agent acts in accordance with the applicable indenture. In addition, we may decide to act as our own paying agent with respect to some or all of the debt securities, and the paying agent may resign.

Payments to Holders and Record Dates for Interest.  We refer to each date on which interest is payable on a debt security as an “interest payment date.” Unless we specify otherwise in the applicable supplement, the provisions described in this section will apply to payments on the debt securities.

Subject to any applicable business day convention as described below, interest payments on the debt securities will be made on each interest payment date applicable to, and at the maturity date of, the debt securities. Interest payable at any interest payment date other than the maturity date will be paid to the registered holder of the debt security on the regular record date for that interest

 

36


Table of Contents

payment date, as described below. However, unless we specify otherwise in the applicable supplement, the initial interest payment on a debt security issued between a regular record date and the interest payment date immediately following the regular record date will be made on the second interest payment date following the original issue date to the holder of record on the regular record date preceding the second interest payment date. The principal and interest payable at maturity will be paid to the holder of the debt security at the time of payment by the paying agent.

Unless we specify otherwise in the applicable supplement, the record date for any interest payment for a debt security in book-entry only form generally will be the date that is two business days (in the case of debt securities denominated in Canadian dollars) or one business day (for all other debt securities, unless we specify otherwise in the applicable supplement) prior to the payment date. If the debt security is in a form that is other than book-entry only, and unless we specify otherwise in the applicable supplement, the regular record date for an interest payment date will be the fifteenth calendar day prior to the interest payment date as originally scheduled to occur, whether or not that date is a business day.

Business Day Conventions.  If the applicable supplement specifies that one of the following business day conventions is applicable to a debt security, the interest payment dates, interest reset dates, and interest periods for that debt security will be affected and, consequently, may be adjusted as described below. Unless we specify otherwise in the applicable supplement, any interest payment due at maturity or on a redemption date or repayment date will not be affected as described below.

 

   

“Following business day convention (adjusted)” means, if an interest payment date would otherwise fall on a day that is not a business day (as described below), then such interest payment date will be postponed to the next day that is a business day. Unless we specify otherwise in the applicable supplement, the related interest reset dates and interest periods also will be adjusted for non-business days.

 

   

“Modified following business day convention (adjusted)” means, if an interest payment date would otherwise fall on a day that is not a business day, then such interest payment date will be postponed to the next day that is a business day, except that, if the next succeeding business day falls in the next calendar month, then such interest payment date will be advanced to the immediately preceding day that is a business day. In each case, unless we specify otherwise in the applicable supplement, the related interest reset dates and interest periods also will be adjusted for non-business days.

 

   

“Following unadjusted business day convention” means, if an interest payment date falls on a day that is not a business day, any payment due on such interest payment date will be postponed to the next day that is a business day; provided that interest due with respect to such interest payment date will not accrue from and including such interest payment date to and including the date of payment of such interest as so postponed. Interest reset dates and interest periods also are not adjusted for non-business days under the following unadjusted business day convention.

 

   

“Modified following unadjusted business day convention” means, if an interest payment date falls on a day that is not a business day, any payment due on such interest payment date will be postponed to the next day that is a business day; provided that interest due with respect to such interest payment date will not accrue from and including such interest payment date to and including the date of payment of such interest as so postponed, and, provided further that, if such next succeeding business day would fall in the next succeeding calendar month, the date of payment with respect to such interest payment date will be advanced to the business day immediately preceding such interest payment date.

 

37


Table of Contents
 

Interest reset dates and interest periods also are not adjusted for non-business days under the modified following unadjusted business day convention.

 

   

“Preceding business day convention” means, if an interest payment date would otherwise fall on a day that is not a business day, then such interest payment date will be advanced to the immediately preceding day that is a business day. If the preceding business day convention is specified in the applicable supplement to be “adjusted,” then the related interest reset dates and interest periods also will be adjusted for non-business days; however, if the preceding business day convention is specified in the applicable supplement to be “unadjusted,” then the related interest reset dates and interest periods will not be adjusted for non-business days.

In all cases, unless we specify otherwise in the applicable supplement, if the maturity date or any earlier redemption date or repayment date with respect to any debt security falls on a day that is not a business day, any payment of principal, premium, if any, interest and any other amounts otherwise due on such day will be made on the next succeeding business day, and no interest on such payment will accrue for the period from and after such maturity date, redemption date or repayment date, as the case may be.

If no business day convention is specified in the applicable supplement, then, with respect to any interest period during which the debt security bears interest at a fixed rate, the following unadjusted business day convention will apply, and, with respect to any interest period during which the debt security bears interest at a floating rate, the modified following business day convention (adjusted) will apply. We also may specify and describe a different business day convention from those described above in the applicable supplement.

Unless we specify otherwise in the applicable supplement, the term “business day” means, for any debt security, a day that meets all the following applicable requirements:

 

   

for all debt securities, is any weekday that is not a legal holiday in New York, New York, Charlotte, North Carolina, or any other place of payment of the debt security, and is not a date on which banking institutions in those cities are authorized or required by law or regulation to be closed;

 

   

for any LIBOR note, also is a day on which commercial banks are open for business (including dealings in the index currency specified in the applicable supplement) in London, England (a “London Banking Day”);

 

   

for any debt security denominated in euro or any EURIBOR note, also is a day on which the TransEuropean Automated Real-Time Gross Settlement Express Transfer, or “TARGET,” System or any successor is operating (a “TARGET Settlement Date”);

 

   

for any debt security denominated in Canadian dollars or any CDOR note, also is not a legal holiday in Toronto, Ontario and is not a day on which banking institutions in that city are authorized or required by law or regulation to be closed (a “Toronto Banking Day”);

 

   

for any debt security denominated in Australian dollars or any BBSW Rate Note, also is not a legal holiday in London, England or Sydney, Australia; and

 

   

for any debt security that has a specified currency other than U.S. dollars, euro, Canadian dollars or Australian dollars, also is not a day on which banking institutions generally are authorized or obligated by law, regulation, or executive order to close in the principal financial center of the country of the specified currency.

 

38


Table of Contents

Payments Due in U.S. Dollars.  Unless we specify otherwise in the applicable supplement, we will follow the practices described in this subsection when we pay amounts that are due in U.S. dollars.

We will make payments on debt securities in book-entry only form in accordance with arrangements then in place between the paying agent and the depository or its nominee, as holder. An indirect owner’s right to receive those payments will be governed by the rules and practices of the depository and its participants, as described below under the heading “Registration and Settlement.”

We will pay any interest on debt securities in definitive form on each interest payment date other than the maturity date by, in our discretion, wire transfer of immediately available funds or check mailed to holders of the debt securities on the applicable record date at the address appearing on our or the security registrar’s records. We will pay any principal, premium (if any), interest, and other amounts payable (if any) at the maturity date of a debt security in definitive form by wire transfer of immediately available funds upon surrender of the debt security at the corporate trust office of the applicable trustee or paying agent.

Book-entry and other indirect owners should contact their banks or brokers for information on how they will receive payments on their debt securities.

Payments Due in Other Currencies.  Unless we specify otherwise in the applicable supplement, we will follow the practices described in this subsection when we pay amounts that are due on a debt security in a currency other than U.S. dollars (referred to as “non-U.S. dollar-denominated debt securities”). Unless we specify otherwise in the applicable supplement, and except as described below, holders of non-U.S. dollar-denominated debt securities are not entitled to receive payments in U.S. dollars of an amount due in another currency, either on a global debt security or a debt security in definitive form.

We will make payments on non-U.S. dollar-denominated debt securities in book-entry only form in the applicable specified currency in accordance with arrangements then in place between the paying agent and the depository or its nominee, as holder. An indirect owner’s right to receive those payments will be governed by the rules and practices of the depository and its participants, as described below under the heading “Registration and Settlement.” Unless we specify otherwise in the applicable supplement, holders of beneficial interests in non-U.S. dollar-denominated debt securities through a participant in The Depository Trust Company, or “DTC,” will receive payments in U.S. dollars, unless they elect to receive payments on those debt securities in the applicable foreign currency. If a holder of such beneficial interests through DTC does not make an election through its DTC participant to receive payments in the applicable foreign currency, the exchange rate agent for the relevant non-U.S. dollar-denominated debt securities to be appointed by us will convert payments to that holder into U.S. dollars, and all costs of those conversions will be borne by that holder by deduction from the applicable payments.

We will pay any interest on non-U.S. dollar-denominated debt securities in definitive form by, in our discretion, wire transfer of immediately available funds or check mailed to holders of the debt securities on the applicable record date at the address appearing on our or the security registrar’s records. We will pay principal and any premium, interest, or other amounts payable at the maturity date of a non-U.S. dollar-denominated debt security in definitive form by wire transfer of immediately available funds upon surrender of the debt security at the corporate trust office of the applicable trustee or an office of the applicable paying agent, as specified in the applicable supplement.

If we issue a non-U.S. dollar-denominated debt security, the relevant specified currency may not be available to us for making payments of principal of or any premium, interest, or other

 

39


Table of Contents

amounts payable on that debt security. This could occur due to the imposition of exchange controls or other circumstances beyond our control, or if the specified currency is no longer used by the government of the country issuing that currency or by public institutions within the international banking community for the settlement of transactions. Unless we specify otherwise in the applicable supplement, if the specified currency is unavailable and has not been replaced, we may satisfy our obligations to holders of the non-U.S. dollar-denominated debt security by making those payments on the date of payment in U.S. dollars. Unless we specify otherwise in the applicable supplement, if the specified currency is unavailable and has been replaced by another currency that has become legal tender for the payment of public and private debts in the country issuing the specified currency as of the original issue date (a “replacement currency”), we may satisfy our obligations to holders of the non-U.S. dollar-denominated debt security by making those payments on the date of payment in the replacement currency or in U.S. dollars, at our option.

At the time the specified currency for a non-U.S. dollar-denominated debt security becomes unavailable due to circumstances beyond our control as described above, we will appoint a financial institution to act as the exchange rate agent to convert the applicable specified currency into U.S. dollars or the replacement currency, if any. If we issue a non-U.S. dollar-denominated debt security in book-entry only form with beneficial interests held through DTC, at the time of issuance of that non-U.S. dollar denominated debt security we will appoint a financial institution to act as the exchange rate agent to convert the applicable specified currency into U.S. dollars, and such exchange rate agent will be identified in the applicable supplement for that non-U.S. dollar-denominated debt security. In any such case, the exchange rate agent to be appointed by us may be one of our affiliates, and, from time to time after the initial appointment of an exchange rate agent, we may appoint one or more different exchange rate agents for the relevant non-U.S. dollar denominated debt security without your consent and without notifying you of the change. The exchange rate agent will determine the applicable rate of exchange that would apply to a payment made in U.S. dollars or a replacement currency in its sole discretion unless we state in the applicable supplement that any determination requires our approval. Absent manifest error, those determinations will be final and binding on you and us.

Book-entry and other indirect owners of a debt security with a specified currency other than U.S. dollars should contact their banks or brokers for information about how to receive payments in the specified currency or in U.S. dollars.

No Sinking Fund

Unless we specify otherwise in the applicable supplement, our debt securities will not be entitled to the benefit of any sinking fund. This means that we will not deposit money on a regular basis into any separate custodial account to repay the debt securities.

Redemption

The applicable supplement will indicate whether we may redeem the debt securities prior to their stated maturity. If we may redeem the debt securities prior to their stated maturity, the applicable supplement will indicate the redemption price, the method for redemption, and the date or dates upon which we may redeem the debt securities. The redemption of any debt security that is our eligible LTD will require the prior approval of the Federal Reserve if after such redemption we would fail to satisfy our requirements as to eligible LTD or total loss-absorbing capacity under the TLAC Rules. In addition, unless we specify otherwise in the applicable supplement, to the extent then required by applicable laws or regulations, our subordinated debt securities may not be redeemed prior to their stated maturity without the requisite prior approvals, if any, from applicable regulators. Unless we specify otherwise in the applicable supplement, and, except as

 

40


Table of Contents

described below with respect to a make-whole redemption, we may redeem debt securities only on an interest payment date, and the redemption price will be 100% of the principal amount of the debt securities to be redeemed, plus any accrued and unpaid interest.

If specified in the applicable supplement, we may redeem the debt securities of any series, at our option, in whole, but not in part, on the interest payment dates or other dates specified in the applicable supplement upon at least 10 business days’ but not more than 60 calendar days’ prior written notice to holders of the applicable series of debt securities being redeemed at a redemption price equal to 100% of the principal amount of such series of debt securities, plus accrued and unpaid interest, if any, thereon, to, but excluding, the applicable redemption date.

Make-Whole Redemption.  If we specify in the applicable supplement, we may redeem the debt securities of any series, at our option, in whole at any time or in part from time to time upon at least 10 business days’ but not more than 60 calendar days’ prior written notice to the holders of the series of debt securities being redeemed, at a “make-whole” redemption price equal to, with respect to debt securities denominated in U.S. dollars, Canadian dollars or Australian dollars, the greater of:

 

  (i)

100% of the principal amount of the debt securities being redeemed; or

 

  (ii)

as determined by the quotation agent described below, the sum of the present values of the remaining scheduled payments of principal and interest on the series of debt securities being redeemed from the date of redemption either (a) to the stated maturity of such debt securities or, (b) if the applicable supplement provides that such debt securities may also be redeemed at a redemption price equal to 100% of the principal amount of such series of debt securities, plus accrued and unpaid interest, if any, thereon, to, but excluding, the applicable redemption date, to the first date on which such debt securities may be so redeemed (in each case, not including any interest accrued to, but excluding, the applicable redemption date) discounted to the applicable redemption date on a semi-annual basis (assuming, unless otherwise specified in the applicable supplement, (1) a 360-day year consisting of twelve 30-day months in the case of debt securities denominated in U.S. dollars or Canadian dollars or (2) a 365-day year, in the case of debt securities denominated in Australian dollars) at (x) in the case of debt securities denominated in U.S. dollars, the treasury rate, (y) in the case of debt securities denominated in Canadian dollars, the GOC bond yield or (z) in the case of debt securities denominated in Australian dollars, the Australian Treasury Bond Rate, plus, in either case of (x), (y) or (z), a spread as indicated in the applicable prospectus supplement,

plus, in either case of (i) or (ii) above, accrued and unpaid interest, if any, on the principal amount of series of debt securities being redeemed to, but excluding, the applicable redemption date. The applicable supplement may provide different terms with respect to a make-whole redemption than those described herein, in which case the terms described in the applicable supplement will govern.

Notwithstanding the foregoing, any interest on the relevant series of debt securities being redeemed that is due and payable on an interest payment date falling on or prior to a redemption date for such series of debt securities will be payable on such interest payment date to holders of such debt securities as of the close of business on the relevant record date according to the terms of such debt securities and the applicable indenture.

Unless we default on payment of the applicable redemption price, interest will cease to accrue on the applicable series of debt securities or portions thereof called for redemption on the applicable redemption date. If fewer than all of the applicable series of debt securities are to be redeemed, for so long as such debt securities are in book-entry only form, such debt securities to be redeemed will

 

41


Table of Contents

be selected in accordance with the procedures of (a) The Depository Trust Company, in the case of debt securities denominated in U.S. dollars, (b) CDS Clearing and Depository Services, Inc., in the case of debt securities denominated in Canadian dollars or (c) Euroclear Bank SA/NV and Clearstream Banking, société anonyme, in the case of debt securities denominated in Australian dollars.

If we redeem any of our debt securities pursuant to a “make-whole” optional redemption, the quotation agent is expected to be Merrill Lynch, Pierce, Fenner & Smith Incorporated, Merrill Lynch Canada Inc. or Merrill Lynch (Australia) Futures Limited, as applicable. Because the quotation agent, including any successor quotation agent or any other entity identified by us in the applicable supplement as a quotation agent, is expected to be our affiliate, the economic interests of such quotation agent may be adverse to your interests as a holder of debt securities subject to our redemption, including with respect to certain determinations and judgments it must make as quotation agent in connection with such “make-whole” optional redemption described above.

For any debt securities denominated in U.S. dollars, Canadian dollars or Australian dollars being redeemed pursuant to a make-whole redemption, the below terms will have the following meaning:

For Debt Securities Denominated in U.S. Dollars:

“treasury rate” means, with respect to the applicable redemption date, the rate per annum equal to: (1) the yield, under the heading that represents the average for the week immediately prior to the applicable calculation date, appearing in the most recently published statistical release appearing on the website of the Federal Reserve or in another recognized electronic source, in each case, as determined by the quotation agent in its sole discretion, and that establishes yields on actively traded U.S. Treasury securities adjusted to constant maturity, for the maturity corresponding to the applicable comparable treasury issue; provided that, if no such maturity is within three months before or after the remaining life (as defined below), yields for the two published maturities most closely corresponding to the applicable comparable treasury issue will be determined and the applicable treasury rate will be interpolated or extrapolated from those yields on a straight-line basis, rounding to the nearest month; or (2) if such release (or any successor release) is not published during the week immediately prior to the applicable calculation date or does not contain such yields, the semi-annual equivalent yield to maturity or interpolated maturity (on a day-count basis) of the applicable comparable treasury issue, calculated using a price for the applicable comparable treasury issue (expressed as a percentage of its principal amount) equal to the related comparable treasury price for such redemption date.

The applicable treasury rate will be calculated by the quotation agent on the third business day preceding the applicable redemption date of the relevant series of debt securities being redeemed.

“comparable treasury issue” means the U.S. Treasury security or securities selected by the quotation agent as having an actual or interpolated (on a day-count basis) maturity comparable to the remaining term from such redemption date either (a) to the stated maturity of such debt securities or, (b) if the applicable supplement provides that such debt securities may also be redeemed at a redemption price equal to 100% of the principal amount of such series of debt securities, plus accrued and unpaid interest, if any, thereon, to, but excluding, the applicable redemption date, to the first date on which such debt securities may be so redeemed (such date, the “remaining life”) of the debt securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such debt securities to be redeemed.

 

42


Table of Contents

“comparable treasury price” means, with respect to a redemption date, (1) the average of the reference treasury dealer quotations for such redemption date, after excluding the highest and lowest reference treasury dealer quotations, provided that the quotation agent obtains five reference treasury dealer quotations, or (2) if the quotation agent obtains fewer than five such reference treasury dealer quotations, the average of all such quotations.

“reference treasury dealer” means (1) Merrill Lynch, Pierce, Fenner & Smith Incorporated, or its successor or any of our other affiliates that may be identified as a reference treasury dealer in the applicable supplement, unless that firm ceases to be a primary U.S. government securities dealer in New York City (a “primary treasury dealer”), in which case we will substitute another primary treasury dealer, and (2) four other primary treasury dealers that we may select.

“reference treasury dealer quotations” means, with respect to each reference treasury dealer and any redemption date, the average, as determined by the quotation agent, of the bid and asked prices for the applicable comparable treasury issue (expressed in each case as a percentage of its principal amount) quoted in writing to the quotation agent by such reference treasury dealer at 3:30 p.m., New York City time, on the third business day preceding such redemption date.

“quotation agent” means Merrill Lynch, Pierce, Fenner & Smith Incorporated or any other entity we identify as the quotation agent in the applicable supplement, including any successor to such entity or, if that firm is unwilling or unable to select the comparable treasury issue, an investment bank of national standing appointed by us.

For Debt Securities Denominated in Canadian Dollars:

“GOC bond yield” means the arithmetic average of the interest rates quoted to the quotation agent by two major Canadian registered investment dealers (that are not the quotation agent) selected by us as being the annual yield to maturity on such date, assuming semi-annual compounding, which a non-callable Government of Canada bond would carry, if issued in Canadian dollars in Canada, at 100% of its principal amount on the applicable date of redemption with a maturity date of either (a) the stated maturity of such debt securities or, (b) if the applicable supplement provides that such debt securities may also be redeemed at a redemption price equal to 100% of the principal amount of such series of debt securities, plus accrued and unpaid interest, if any, thereon, to, but excluding, the applicable redemption date, the first date on which such debt securities may be so redeemed (such date, the “remaining life”). The GOC bond yield will be determined by the quotation agent as set forth above on the third business day immediately preceding the applicable redemption date.

“quotation agent” means Merrill Lynch Canada Inc. or any other entity we identify as the quotation agent in the applicable supplement, including any successor to such entity or, if that firm is unwilling or unable to select the GOC bond yield, a Canadian investment bank appointed by us.

For Debt Securities Denominated in Australian Dollars:

“Australian treasury bond rate” will be determined by the quotation agent and means, with respect to any redemption date, (a) the rate per annum equal to the equivalent yield to maturity as of such date of the comparable Australian treasury bond, assuming a price for the comparable Australian treasury bond (expressed as a percentage of its principal amount) equal to the comparable Australian treasury bond price for such redemption date or (b) if the rate cannot be determined in accordance with clause (a), the rate (expressed as a yield to maturity) published by the Reserve Bank of Australia at or about 5:00 p.m. (Sydney time) on that day as the average of the buy and sell rates transacted on that day by authorized bond dealers for the series of Australian Commonwealth Government Treasury Bonds with a remaining term to maturity closest to the

 

43


Table of Contents

period from such redemption date either (i) to the stated maturity of such debt securities or, (ii) if the applicable supplement provides that such debt securities may also be redeemed at a redemption price equal to 100% of the principal amount of such series of debt securities, plus accrued and unpaid interest, if any, thereon, to, but excluding, the applicable redemption date, to the first date on which such debt securities may be so redeemed (such period, the “remaining life”).

“comparable Australian treasury bond” means the Australian Commonwealth Government Treasury security selected by a reference Australian treasury bond dealer as having a fixed maturity most nearly equal to the remaining life of the debt securities, and that would be utilized at the time of selection and in accordance with customary financial practice in pricing new issues of Australian dollar-denominated corporate debt securities in a principal amount approximately equal to the then outstanding principal amount of the debt securities and of a comparable maturity most nearly equal to the remaining life of the debt securities; provided, however, that, if the remaining life of the debt securities is less than one year, a fixed maturity of one year shall be used.

“comparable Australian treasury bond price” means, with respect to any redemption date, the average of all reference Australian treasury bond dealer quotations for such date (which, in any event, must include at least two such quotations), after excluding the highest and lowest such reference Australian treasury bond dealer quotations, or if fewer than four such reference Australian treasury bond dealer quotations are obtained, the average of all such quotations.

“quotation agent” means Merrill Lynch (Australia) Futures Limited, or any other entity we identify as the quotation agent in the applicable supplement, including any successor to such entity or, if that firm is unwilling or unable to perform as described above, an investment bank of national standing appointed by us.

“reference Australian treasury bond dealer” means any authorized bond dealer appointed by us.

“reference Australian treasury bond dealer quotations” means, with respect to each reference Australian treasury bond dealer and any redemption date, the average, as determined by the quotation agent, of the bid and offered prices for the Comparable Australian Treasury Bond (expressed in each case as a percentage of its principal amount) quoted in writing to the quotation agent by such reference Australian treasury bond dealer at 3:30 p.m. (Sydney time), on the third business day in Sydney preceding the redemption date.

Notice of Redemption.  Unless we specify otherwise in the applicable supplement, we may exercise our right to redeem debt securities by giving notice to the holders under the applicable indenture at least 10 business days but not more than 60 calendar days before the specified redemption date. The notice will take the form of a certificate signed by us specifying:

 

   

the date fixed for redemption;

 

   

the redemption price (or, if not then ascertainable, the manner of calculation thereof);

 

   

the CUSIP number and any other identifying number of the debt securities to be redeemed;

 

   

the amount to be redeemed, if less than all of a series of debt securities is to be redeemed;

 

   

the place of payment for the debt securities to be redeemed; and

 

   

that, subject to satisfaction of any conditions to such redemption set forth in the notice of redemption and unless we default in payment of the redemption price, on and after the date fixed for redemption, interest (if any) will cease to accrue on the debt securities to be redeemed.

 

44


Table of Contents

For debt securities issued under the 2018 Indentures only, such redemption may be subject to the satisfaction of one or more conditions precedent, in which case the notice of redemption will describe each condition and, if applicable, state that the redemption date may, in our discretion, be delayed until such time as any or all conditions have been satisfied, or such redemption may not occur and such notice may be rescinded in the event that any or all of the conditions have not been satisfied by the redemption date stated in the notice of redemption, or by the redemption date as it may be delayed in our discretion.

So long as a depository is the record holder of the applicable debt securities to be redeemed, we, or the trustee on our behalf if we so request, will deliver any notice of our election to exercise our redemption right only to that depository.

Repayment

The applicable supplement will indicate whether the debt securities can be repaid at the holder’s option prior to their stated maturity. If the debt securities may be repaid prior to their stated maturity, the applicable supplement will indicate the applicable repayment price or prices, the procedures for repayment and the date or dates on or after which the holder can request repayment.

Repurchase

We may purchase at any time and from time to time, including through a subsidiary or affiliate of ours, outstanding debt securities by tender, in the open market, or by private agreement. The repurchase of any debt security that is our eligible LTD will require the prior approval of the Federal Reserve if after such repurchase we would fail to satisfy our requirements as to eligible LTD or total loss-absorbing capacity under the TLAC Rules. We, or our affiliates, have the discretion to hold or resell any repurchased debt securities. We also have the discretion to cancel any repurchased debt securities.

Conversion

We may issue debt securities that are convertible into, or exercisable or exchangeable for, at either our option or the holder’s option or otherwise as provided in the applicable supplement, our preferred stock, depositary shares, common stock, or other debt securities. The applicable supplement will describe the terms of any conversion, exercise, or exchange features, including:

 

   

the periods during which conversion, exercise, or exchange, as applicable, may be elected;

 

   

the conversion, exercise, or exchange price payable and the number of shares or amount of our preferred stock, depositary shares, common stock, or other debt securities, that may be issued upon conversion, exercise, or exchange, and any adjustment provisions; and

 

   

the procedures for electing conversion, exercise, or exchange, as applicable.

Exchange, Registration, and Transfer

Subject to the terms of the applicable indenture, debt securities of any series in definitive form may be exchanged at the option of the holder for other debt securities of the same series and of an equal aggregate principal amount and type in any authorized denominations.

Debt securities in definitive form may be presented for registration of transfer at the office of the security registrar or at the office of any transfer agent that we designate and maintain. The

 

45


Table of Contents

security registrar or the transfer agent will make the registration of transfer only if it is satisfied with the documents of title and identity of the person making the request. There will not be a service charge for any exchange or registration of transfer of debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the exchange or transfer. Unless we specify otherwise in the applicable supplement, The Bank of New York Mellon Trust Company, N.A. will be the authenticating agent, security registrar, and transfer agent for the debt securities issued under the respective indentures. We may change the security registrar or the transfer agent or approve a change in the location through which any security registrar or transfer agent acts at any time, except that we will be required to maintain a security registrar and transfer agent in each place of payment for each series of debt securities. At any time, we may designate additional transfer agents for any series of debt securities.

We will not be required to (1) issue, exchange, or register the transfer of any debt security of any series to be redeemed for a period of 15 days before (a) in the case of debt securities issued under the 2018 Indentures, the date on which we deliver the notice of redemption or (b) in the case of debt securities issued under the 1995 Indentures, any selection of such debt securities to be redeemed or (2) exchange or register the transfer of any debt security (i) that was selected, called, or is being called for redemption, except the unredeemed portion of any debt security being redeemed in part or (ii) as to which the holder has exercised any right to require us to repay such debt security, except the portion to remain outstanding of any debt security being repaid in part.

For a discussion of restrictions on the exchange, registration, and transfer of book-entry only securities, see “Registration and Settlement” below.

Subordination

Our subordinated debt securities are subordinated and junior in right of payment to all of our “senior indebtedness.” The 2018 Subordinated Indenture and 1995 Subordinated Indenture define “senior indebtedness” as any indebtedness for money borrowed, including all of our indebtedness for borrowed and purchased money, all of our obligations arising from off-balance sheet guarantees and direct credit substitutes, and our obligations associated with derivative products such as interest and foreign exchange rate contracts and commodity contracts, that was outstanding on the date we executed the 2018 Subordinated Indenture or 1995 Subordinated Indenture, as applicable, or was created, incurred, or assumed after that date, for which we are responsible or liable as obligor, guarantor, or otherwise, and all deferrals, renewals, extensions, and refundings of that indebtedness or obligations, other than the debt securities issued under the Subordinated Indentures or any other indebtedness that by its terms is subordinate in right of payment to any of our other indebtedness. Each supplement for a series of subordinated debt securities will indicate the aggregate amount of our senior indebtedness outstanding, as of the most recent practicable date, and any limitation on the issuance of additional senior indebtedness. As of March 31, 2018, on a non-consolidated basis, we had approximately $163 billion of senior long-term debt and certain senior short-term borrowings. Senior indebtedness also includes our obligations under letters of credit, guarantees, foreign exchange contracts and interest rate swap contracts, none of which are included in such amount. In addition, holders of subordinated debt securities may be fully subordinated to interests held by the U.S. government in the event that we enter into a receivership, insolvency, liquidation or similar proceeding.

If there is a default or event of default under any senior indebtedness that would allow acceleration of maturity of that senior indebtedness and that default or event of default is not remedied, and we and the trustee of the applicable Subordinated Indenture receive notice of this default from the holders of at least 10% in principal amount of any kind or category of any senior

 

46


Table of Contents

indebtedness or if the trustee of the applicable Subordinated Indenture receives notice from us, then we will not be able to make any principal, premium, interest, or other payments on the subordinated debt securities or repurchase our subordinated debt securities.

If any subordinated debt security is declared due and payable before the stated maturity (or other date for payment of principal) upon a payment or distribution of our assets to creditors pursuant to our dissolution, winding up, liquidation, or reorganization, whether voluntary or involuntary, we are required to pay all principal, premium (if any), interest (if any), or other payments (if any) to holders of senior indebtedness before any holders of subordinated debt are paid. In addition, if any amounts previously were paid to the holders of subordinated debt or the trustee under a Subordinated Indenture, the holders of senior indebtedness will have first rights to the amounts previously paid.

Subject to the payment in full of all our senior indebtedness, the holders of our subordinated debt securities will be subrogated to the rights of the holders of our senior indebtedness to receive payments or distributions of our assets applicable to the senior indebtedness until our subordinated debt securities are paid in full. For purposes of this subrogation, the subordinated debt securities will be subrogated equally and ratably with all our other indebtedness that by its terms ranks equally with our subordinated debt securities and is entitled to like rights of subrogation.

Due to differing subordination provisions in various series of subordinated debt securities issued by us and our predecessors, in the event of a dissolution, winding up, liquidation, reorganization, insolvency, receivership or other proceeding, holders of subordinated debt securities may receive more or less, ratably, than holders of some other series of our outstanding subordinated debt securities.

Sale or Issuance of Capital Stock of Banks

The 2018 Senior Indenture and the 1995 Senior Indenture prohibit the issuance, sale, or other disposition of capital stock, or securities convertible into or options, warrants, or rights to acquire capital stock, of any Principal Subsidiary Bank (as defined below) or of any subsidiary which owns shares of capital stock, or securities convertible into or options, warrants, or rights to acquire capital stock, of any Principal Subsidiary Bank, with the following exceptions:

 

   

sales or other dispositions of directors’ qualifying shares;

 

   

sales or other dispositions for fair market value, if, after giving effect to the disposition and to conversion of any shares or securities convertible into capital stock of a Principal Subsidiary Bank, we would own at least 80% of each class of the capital stock of that Principal Subsidiary Bank;

 

   

sales or other dispositions made in compliance with an order of a court or regulatory authority of competent jurisdiction;

 

   

any sale by a Principal Subsidiary Bank of additional shares of its capital stock, securities convertible into shares of its capital stock, or options, warrants, or rights to subscribe for or purchase shares of its capital stock, to its stockholders at any price, so long as before that sale we owned, directly or indirectly, securities of the same class and immediately after the sale, we owned, directly or indirectly, at least as great a percentage of each class of securities of the Principal Subsidiary Bank as we owned before the sale of additional securities; and

 

47


Table of Contents
   

any issuance of shares of capital stock, or securities convertible into or options, warrants, or rights to subscribe for or purchase shares of capital stock, of a Principal Subsidiary Bank or any subsidiary which owns shares of capital stock, or securities convertible into or options, warrants, or rights to acquire capital stock, of any Principal Subsidiary Bank, to us or our wholly owned subsidiary.

A “Principal Subsidiary Bank” is defined in the 1995 Senior Indenture and 2018 Senior Indenture as any subsidiary bank with total assets equal to more than 10% of our total consolidated assets. As of the date of this prospectus, Bank of America, N.A. is our only Principal Subsidiary Bank.

Limitation on Mergers and Sales of Assets

Each indenture generally permits a consolidation or merger between us and another entity. It also permits the sale, conveyance or transfer by us of all or substantially all of our assets. These transactions are permitted if:

 

   

the resulting or acquiring entity, if other than us, is organized and existing under the laws of the United States, any state of the United States or the District of Columbia and expressly assumes all of our obligations under that indenture; and

 

   

immediately after the transaction, we (or any successor entity) are not in default in the performance of any covenant or condition under that indenture.

With respect to (a) debt securities issued under either of the 2018 Indentures and (b) debt securities issued under either of the 1995 Indentures on or after February 23, 2017, the foregoing requirements do not apply in the case of a sale, conveyance or transfer by us of all or substantially all of our assets to one or more entities that are direct or indirect subsidiaries in which we and/or one or more of our subsidiaries own more than 50% of the combined voting power.

Upon any consolidation, merger, sale, conveyance or transfer of this kind (other than, where permitted as described above, a sale, conveyance or transfer to our direct or indirect subsidiary or subsidiaries in which we own more than 50% of the combined voting power as described in the preceding paragraph), the resulting or acquiring entity will be substituted for us in the applicable indenture with the same effect as if it had been an original party to that indenture. As a result, the successor entity may exercise our rights and powers under that indenture.

Waiver of Covenants

The holders of a majority in principal amount of the debt securities of all affected series then outstanding under an indenture may waive compliance with some of the covenants or conditions of that indenture.

Modification of the Indentures

We and the trustee may modify the applicable indenture and the rights of the holders of the debt securities with the consent of the holders of at least (a) in the case of debt securities issued under either of the 1995 Indentures, 66 2/3% and (b) in the case of debt securities issued under either of the 2018 Indentures, 50%, in each case of the aggregate principal amount of all series of outstanding debt securities under that indenture affected by the modification.

 

48


Table of Contents

No modification may extend the fixed maturity of, reduce the principal amount or redemption premium of, or reduce the rate of, or extend the time of payment of interest on, any debt security without the consent of each holder affected by the modification. No modification may reduce the percentage of debt securities that is required to consent to modification of an indenture without the consent of all holders of the debt securities outstanding under that indenture.

In addition, we and the trustee may execute supplemental indentures in some circumstances without the consent of any holders of outstanding debt securities.

For purposes of determining the aggregate principal amount of the debt securities outstanding at any time in connection with any request, demand, authorization, direction, notice, consent, or waiver under the applicable indenture, (1) the principal amount of any debt security issued with original issue discount is that amount that would be due and payable at that time upon a declaration of acceleration of the maturity of the original issue discount note, and (2) the principal amount of a debt security denominated in a foreign currency or currency unit is the U.S. dollar equivalent on the date of original issuance of the debt security, determined as specified in the applicable supplement for that debt security.

Meetings and Action by Securityholders

The trustee may call a meeting in its discretion, or upon request by us or the holders of at least 10% in principal amount of a series of outstanding debt securities, by giving notice. If a meeting of holders is duly held, any resolution raised or decision taken in accordance with the indenture will be binding on all holders of debt securities of that series.

Events of Default and Rights of Acceleration; Covenant Breaches

The 2018 Senior Indenture and the 1995 Senior Indenture define an event of default for a series of senior debt securities as any one of the following events:

 

   

our failure to pay principal of or any premium on any senior debt securities of that series when due and payable, and continuance of such default for a period of 30 days;

 

   

our failure to pay interest on any senior debt securities of that series when due and payable, and continuance of such default for a period of 30 days;

 

   

specified events involving our bankruptcy, insolvency, or liquidation; and

 

   

any other events of default specified for a series of senior debt securities pursuant to the 2018 Senior Indenture or the 1995 Senior Indenture, as applicable.

Any additional or different events of default for a series of senior debt securities will be specified in the applicable supplement.

The 2018 Subordinated Indenture and 1995 Subordinated Indenture define an event of default for subordinated debt securities only as our voluntary or involuntary bankruptcy under U.S. federal bankruptcy laws (and, in the case of our involuntary bankruptcy, continuing for a period of 60 days) and any other events of default specified for a series of subordinated debt securities pursuant to the applicable Subordinated Indenture.

Unless otherwise specified in the applicable supplement, if an event of default under an indenture occurs and is continuing, either the trustee or the holders of 25% in aggregate principal

 

49


Table of Contents

amount of the debt securities outstanding under the applicable indenture (or, in the case of an event of default with respect to a series of senior debt securities under the 2018 Senior Indenture or the 1995 Senior Indenture, the holders of 25% in aggregate principal amount of the outstanding senior debt securities of all series affected) may declare the principal amount, or, if the debt securities are issued with original issue discount, such amount as described in the applicable supplement, of all debt securities (or the outstanding senior debt securities of all series affected, as the case may be) to be due and payable immediately. The holders of a majority in aggregate principal amount of the debt securities then outstanding (or of all series affected, as the case may be), in some circumstances, may annul the declaration of acceleration and waive past defaults.

With respect to a failure on our part to observe or perform any of the covenants or agreements contained in the debt securities or in the applicable indenture (other than (i) with respect to senior debt securities, those for which acceleration rights are available as discussed above and (ii) with respect to subordinated debt securities, default in payment of principal or interest), which failure continues for a period of 90 days after the date on which written notice of such failure is given (a “covenant breach”), the trustee and the holders of the debt securities may pursue certain remedies as described below or as set forth in the applicable indenture.

Unless otherwise specified in the applicable supplement, an event of default will not occur under our senior debt securities, and neither the trustee nor the holders of any senior debt securities will have the right to accelerate the payment of principal of such senior debt securities, as a result of a covenant breach. In addition, an event of default will not occur, and neither the trustee nor the holders of such senior debt securities will have the right to accelerate the payment of principal of such senior debt securities, as a result of our failure to pay principal of or premium on such senior debt securities when due and payable until such default has continued for a period of 30 days.

Unless otherwise specified in the applicable supplement, payment of principal of the subordinated debt securities may not be accelerated in the case of a default in the payment of principal or any premium, interest, or other amounts or a breach in the performance of any of our other covenants.

We are required periodically to file with the trustees a certificate stating that we are not in default under any of the terms of the indentures.

Collection of Indebtedness and Suits for Enforcement by Trustee

If (i) we fail to pay the principal of or (other than with respect to debt securities issued under the 1995 Subordinated Indenture) any premium on any debt securities, (ii) we are over 30 calendar days late on an interest payment on the debt securities, or (iii) for subordinated debt securities issued under the 1995 Subordinated Indenture, we default in the performance of our other covenants under such indenture, the applicable trustee can demand that we pay to it, for the benefit of the holders of those debt securities, the amount which is due and payable on those debt securities, including any interest incurred because of our failure to make that payment. In the event of our nonpayment of principal, interest or any premium (which nonpayment for senior debt securities constitutes an event of default) or a covenant breach, the trustee may take appropriate action, including instituting judicial proceedings against us.

In addition, a holder of our debt securities also may file suit to enforce our obligation to make payment of principal, any premium, interest, or other amounts payable on such debt securities regardless of the actions taken by the trustee.

 

50


Table of Contents

The holders of a majority in principal amount of each series of the debt securities then outstanding under an indenture may direct the time, method, and place of conducting any proceeding for any remedy available to the trustee under that indenture. The trustee may decline to act if the direction is contrary to law and in certain other circumstances set forth in the applicable indenture. The trustee is not obligated to exercise any of its rights or powers under the applicable indenture at the request or direction of the holders of the debt securities unless the holders offer the trustee reasonable indemnity against expenses and liabilities.

Limitation on Suits

Each indenture provides that no individual holder of debt securities of any series may institute any action against us under that indenture, except actions for payment of overdue principal and interest, unless the following actions have occurred:

 

   

the holder must have previously given written notice to the trustee of a continuing event of default or covenant breach;

 

   

the holders of not less than 25% in principal amount of such outstanding debt securities issued under the applicable indenture must have (1) requested the trustee to institute proceedings in respect of such event of default or covenant breach and (2) offered the trustee indemnity against liabilities incurred by the trustee for taking such action, which indemnity is (a) in the case of actions by holders of debt securities issued under the 1995 Indentures, reasonable and (b) in the case of actions by holders of debt securities issued under the 2018 Indentures, reasonably satisfactory to the trustee;

 

   

the trustee must have failed to institute proceedings within 60 days after receipt of the request referred to above; and

 

   

the holders of a majority in principal amount of such outstanding debt securities issued under the applicable indenture must not have given direction to the trustee inconsistent with the request of the holders referred to above.

However, the holder of any senior debt securities will have an absolute right to receive payment of principal of and any premium and interest on the senior debt security when due and to institute suit to enforce this payment, and the holder of any subordinated debt securities will have, subject to applicable subordination provisions, the absolute right to receive payment of principal of and any premium and any interest on the subordinated debt security when due and to institute suit to enforce this payment.

Payment of Additional Amounts

If we so specify in the applicable supplement, and subject to the exceptions and limitations set forth below, we will pay to the beneficial owner of any debt security that is a “non-U.S. person” additional amounts to ensure that every net payment on that debt security will not be less, due to the payment of U.S. withholding tax, than the amount then otherwise due and payable. For this purpose, a “net payment” on a debt security means a payment by us or any paying agent, including payment of principal and interest, after deduction for any present or future tax, assessment, or other governmental charge of the United States (other than a territory or possession). These additional amounts will constitute additional interest on the debt security. For this purpose, U.S. withholding tax means a withholding tax of the United States, other than a territory or possession.

 

51


Table of Contents

However, notwithstanding our obligation, if so specified, to pay additional amounts, we will not be required to pay additional amounts in any of the circumstances described in items (1) through (15) below, unless we specify otherwise in the applicable supplement.

 

  (1)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security:

 

   

having a relationship with the United States as a citizen, resident, or otherwise;

 

   

having had such a relationship in the past; or

 

   

being considered as having had such a relationship.

 

  (2)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security:

 

   

being treated as present in or engaged in a trade or business in the United States;

 

   

being treated as having been present in or engaged in a trade or business in the United States in the past;

 

   

having or having had a permanent establishment in the United States; or

 

   

having or having had a qualified business unit which has the U.S. dollar as its functional currency.

 

  (3)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security being or having been a:

 

   

personal holding company;

 

   

foreign personal holding company;

 

   

private foundation or other tax-exempt organization;

 

   

passive foreign investment company;

 

   

controlled foreign corporation; or

 

   

corporation which has accumulated earnings to avoid U.S. federal income tax.

 

  (4)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security owning or having owned, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote.

 

  (5)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the beneficial owner of the debt security being a bank extending credit under a loan agreement entered into in the ordinary course of business.

 

52


Table of Contents

For purposes of items (1) through (5) above, “beneficial owner” includes, without limitation, a holder and a fiduciary, settlor, partner, member, shareholder, or beneficiary of the holder if the holder is an estate, trust, partnership, limited liability company, corporation, or other entity, or a person holding a power over an estate or trust administered by a fiduciary holder.

 

  (6)

Additional amounts will not be payable to any beneficial owner of a debt security that is:

 

   

A fiduciary;

 

   

A partnership;

 

   

A limited liability company;

 

   

Another fiscally transparent entity; or

 

   

Not the sole beneficial owner of the debt security, or any portion of the debt security.

However, this exception to the obligation to pay additional amounts will apply only to the extent that a beneficiary or settlor in relation to the fiduciary, or a beneficial owner, partner, or member of the partnership, limited liability company or other fiscally transparent entity, would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner, partner, or member received directly its beneficial or distributive share of the payment.

 

  (7)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld solely by reason of the failure of the beneficial owner of the debt security or any other person to comply with applicable certification, identification, documentation, or other information reporting requirements. This exception to the obligation to pay additional amounts will apply only if compliance with such requirements is required as a precondition to exemption from such tax, assessment, or other governmental charge by statute or regulation of the United States or by an applicable income tax treaty to which the United States is a party.

 

  (8)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is collected or imposed by any method other than by withholding from a payment on a debt security by us or any paying agent.

 

  (9)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld by reason of a change in law, regulation, or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later.

 

  (10)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any tax, assessment, or other governmental charge that is imposed or withheld by reason of the presentation by the beneficial owner of a debt security for payment more than 30 days after the date on which such payment becomes due or is duly provided for, whichever occurs later.

 

  (11)

Additional amounts will not be payable if a payment on a debt security is reduced as a result of any: