Ms. Carnoy is an aggressive optimist, and an aggressive employee. Two years ago, when she was Merrill Lynch’s co-head of equity capital markets for the Americas, desperate to raise equity for a firm collapsing under subprime catastrophes, she spent Christmas morning on a conference call in a hotel bathroom. Another night, she guided her daughter out of her bedroom’s princess tent at 3 a.m., crawling inside to speak with a sovereign wealth fund manager.
According to Investment Dealers Digest, few women “have risen in such male-dominated areas as ECM, a business defined by long hours, sales pitches, stiff competition and buddying up with corporate chiefs. One needs a lot of stamina for this role, and Carnoy pounds the tables as well as anyone.” As she tells it, she hadn’t asked to be promoted to the global head of equity capital markets after Bank of America bought Merrill. “Have you seen my passport? God no,” she said. “Now I have to go to Asia.”
Even though she was once an American history major, the enormity of last month’s offering didn’t press down on her quite as hard as her earlier work to raise money for flailing Merrill. But it pressed nonetheless. “This deal is not fighting for our survival, but fighting for our freedom,” she said. “And also to show the world that this combined company is working, it’s profitable, it’s successful, it’s able to raise all this money and off we go.”
“WE WANT TO BREAK IN HERE because we do have some breaking news,” CNBC’s Melissa Lee said late Wednesday, Dec. 2, on the phone with Charlie Gasparino. “Bank of America is out of the TARP program, they’re going to pay $45 billion back,” he said, gulping. “And, I’m going through my notes here—they’re raising capital.”
The plan was to sell a tectonic amount of stock, and to pay back the rest of the money with excess liquidity. “Which means, essentially,” said Ms. Lee, “that the stock will be diluted?”
“Well, maybe, but they’re going to repay TARP,” Mr. Gasparino said. “I can’t imagine Citigroup’s leaving the TARP program anytime soon.”
At 6 a.m. the next morning, the bank outlined the deal in a S.E.C. filing. By midday, the offering’s fate was clear: “It’s a little like being 6 years old,” Mr. Cummings said, “and knowing you’re going to Disney World the next day.” Bank of America’s president of global banking and markets, Tom Montag, who had been given a $39.4 million bonus in 2008 after running the Merrill arm that lost $15 billion in a quarter, stuck his head in: “Boy,” he said, “this is nice.”
His colleagues had spent months preparing. Besides perfecting the right story to share with investors, they built a deal with true artfulness: Bank of America needed a shareholder vote to approve such a big stock offering, but there wouldn’t be time for one. “The thought was,” Ms. Carnoy said, “how do you make something that looks, smells, breaths and acts like common stock?”
The solutions were called common equivalent securities and contingent warrants, which essentially both morph into actual stock. Better yet, when the old stockholders’ vote finally rolls around, penalties built into the deal make it nearly impossible for a rejection.
After a Thursday spent dealing with investors, Ms. Carnoy and her team picked a price for the new stock at 5:30 p.m.: $15, or just less than a 5 percent discount on its market price. Citigroup’s discount would be four times steeper when it sold off a massive amount of equity later in the month.
The leaders of TARP-supported banks, Ms. Carnoy included, like to point out how much the federal government made by investing in Wall Street, but not, of course, how resplendently Wall Street would have collapsed without the investment. Still, they like to feel that there’s a lesson to be learned here: After the stock was priced, Ms. Carnoy had someone Google the National Anthem. It played over Bank of America’s loud system.
She was moved, even though she’d just pulled off a plan to finally rid Bank of America of America. “I mean, there is some irony to it, right, because we were in such a rush to pay it back,” she said. “But there was still good feeling that we were doing something great for our company, doing something good for our country.”
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