BAC Capital, the nation’s second-largest bank, has been secured a $25.5 billion credit card debt secured by a secured loan from a credit card issuer.
The deal was announced on Monday in New York City by BAC Chief Executive Officer Scott Weiland.
“This is a significant credit enhancement to our credit portfolio and an important milestone in our ongoing transformation to a leader in sustainable growth and transformation,” Weiland said in a statement.
BAC Capital had recently raised $9.5 million to expand its growth, and Weiland noted that the credit expansion was aimed at helping the company address the challenges it faces in its home market.
The loan, which was secured by the Bank of New York Mellon, has a term of 25 years.
Under the terms of the agreement, BAC will pay the lender a principal of $250,000.
BAC has also agreed to pay $50,000 in interest annually.BAC also agreed not to sell any assets, pay dividends or take any other actions that could affect the value of the debt.
Bac will have to pay a $2.4 billion repurchase fee on the debt, with $1.6 billion in proceeds to be distributed to shareholders, according to a news release.
In a statement, Weiland wrote that the company has been “unable to reach an agreement” to purchase BAC’s credit portfolio in a competitive market.
The company has “unwillingness to continue the painful path of dilution, which could ultimately have a detrimental effect on our business and the broader economy.”BAC has seen a sharp decline in the value, and the company had been trying to shore up its position with a new financing package, according in a report last month by The New York Times.
While the bank’s stock price has risen, the deal is also a significant achievement for Weiland, who took over the reins at the end of 2014.
Weiland also said the credit extension was the bank “taking the right step to address our credit risk,” according to the Times.
He also added that BAC would continue to improve its balance sheet and credit portfolio.