B of A Increases Size of Offering to Japan Banks : $425 Million Sought to Replenish Capital Supply

SAN FRANCISCO —  BankAmerica, moving to replenish its loan-loss ravaged capital accounts, Wednesday increased the size of a proposed offering of capital securities by $75 million, to $425 million.

The total includes $250 million in floating-rate notes and warrants to be sold to Japanese banks, $100 million in convertible preferred stock to be sold to Japanese insurance companies and $75 million in floating-rate notes and warrants to be offered to the public in the United States and abroad.

Although banking industry sources said the Japanese had exacted stiff concessions from the parent of Bank of America during the lengthy negotiations, a BankAmerica spokesman said Wednesday that the “essential terms” had “not changed significantly” since they were first proposed by BankAmerica earlier this year.

The 12-year notes will pay their holders an interest rate of 1.25 percentage points above a commonly used benchmark rate for three-month securities in London. The London rate--known as LIBOR--stood at 8.5625% on Wednesday.

BankAmerica had initially sought an interest rate of 1 percentage point higher than the London benchmark rate, as well as an interest rate cap of 12%.

Expire in 10 Years

The notes will be sold together with warrants that are convertible into BankAmerica common stock at an exercise price $17.50 per share.

Each $100,000 worth of notes will include warrants giving the purchaser the right to buy 2,500 shares of BankAmerica common; if all the warrants are exercised, BankAmerica will issue 8.125 million shares. The warrants will expire in 10 years.

BankAmerica common, which has been depressed due to the corporation’s loan losses, management upheaval, financial scandals and other woes, closed Wednesday at $11.50 a share on the New York Stock Exchange, up 25 cents.

The preferred stock, with a stated value of $1,000 a share, will have a fixed dividend of 9.5% and be convertible into BankAmerica common shares at the conversion rate of $17.50 per common share.

If all the warrants are exercised and all the preferred shares converted, BankAmerica will issue an additional 13.9 million common shares--less than 10% of the 155 million common shares now outstanding.

Four decades ago, Bank of America became the first U.S. bank to provide financing to rebuild Japan’s war-torn economy. That BankAmerica was forced to turn to Japan for help reflects both the company’s recent woes and Japan’s pre-eminence in world financial markets.

The long negotiations were conducted under the glare of publicity on both sides of the Pacific. Although Japanese negotiators leaked word of concessions, BankAmerica is believed to have won better terms in certain areas.