Bank of America's Game-Changer

CHARLOTTE, N.C. ( TheStreet) -- Looks like Bank of America's ( BAC) departing CEO Ken Lewis is getting the last laugh.

The announcement after Wednesday's market close of a deal for Bank of America, the largest U.S. bank holding company, to repay the Treasury $45 billion received via the Troubled Assets Relief Program, or TARP, was a slam dunk for the bank, a watershed for the industry and underlines an amazing opportunity for investors.

The discussion Wednesday about the possibility of a breakup of Bank of America already seems like ancient history.

In a late October report supporting a "Buy" rating on Bank of America, Sandler O'Neill analyst Jeff Harte said the threat of dilution to common shareholders from a capital raise tied to the repayment of TARP would be "outweighed" by the "opportunity to reduce preferred dividends." He also said "the limited available shares for issuance limit the firm's near-term capital raise ability."

The company aims to get around its limit of 10 billion authorized shares (with 8.7 billion common shares already outstanding and another 1 billion reserved for convertibles, warrants, etc.) by issuing a new class of preferred shares that will be junior to other preferred shares but senior to the common, and automatically converted one-for-one to the common once current shareholders authorize a substantial increase in the allowed number of common shares.

The deal requires shareholder approval to raise the authorized share limit within 105 days. If current shareholders fail to increase the authorized share limit, the company will stay within the current limit of 10 billion shares, automatically converting 200 million of the new preferred shares into common.

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