Fact of the matter is, yes you have said that many times now, but you have not produced the documentation specifically and literally supporting your argument. There is NO legal wording in the 8-K that legally binds BofA against being allowed to hedge the investment or specifically stating what a “certain event” is. If you were a BofA shareholder and you saw the firm making that kind of investment in a near dead horse you are expecting that they hedge. If they don’t when it is perfectly legal and deters some of the risk of the convertible, they will piss off many an investor/shareholder.
I can guarantee that with the current legalize (or lack of!) in the 8-K, if CFC does go BK, BofA with preferred shares will be getting “1st” dibs to $2B in equity at the value of liquidation. Since there are not any other noted “Preferred” large shareholders the first $2B goes straight to BofA if there is $2B at all. If the liquidation value is less than that then BofA will have a legal course for recovering the CFC loan servicing unit which is the only piece of CFC of any value. Add to that the ~7% on the convertible they were collecting and the ~25% or greater hedge and it is a low-risk win big investment by BofA.
If you provide written documentation prohibiting BofA from doing any of this please present and I will eat my words. If it is not specifically prohibited and legally bound it is a loophole and you can bet your money they are exploiting it. That is what these companies do and why they have $200+Billion market cap. That is their business.
