Bank of America raises more than the $33.9B U.S. required

NEW YORK -- The Charlotte-based bank said it has preliminarily agreed to exchange $3.9 billion in depository shares for common stock as part of a debt exchange offer. Settlement of the exchange, which was oversubscribed, is expected to be completed Friday.

The bank has also reached agreements to convert about $10.7 billion in preferred stock into 789 million shares of common stock.

Because of the debt exchanges, and previously completed stock and assets sales, Bank of America said it will raise more than the $33.9 billion the government said last month the bank needed to protect against potential losses should the economy worsen.

Last month, the government completed "stress tests" on 19 of the nation's largest financial firms to determine how they would fare amid a deepening recession. The government determined Bank of America had the largest capital shortfall.

By increasing the number of outstanding common shares, Bank of America effectively creates a broader capital base to absorb any potential losses. It also reduces interest or dividend payments that must be made on the depository and preferred shares.

Bank of America has been one of the banks hardest hit by the credit crisis and ongoing recession. The bank has received $45 billion in government loans since last fall to help it amid mounting loan and investment losses.

Nearly all banks have faced rising loan losses as more customers fall behind on payments. Investment losses have also piled up at some banks as the value of bonds and other debt have declined.