(By Balaseshan) Bank of America Corp. (NYSE:BAC) will pay $2.43 billion to settle a class action lawsuit brought in 2009 related to Merrill Lynch acquisition.
Bank of America said it, and certain of its current and former officers and directors, have agreed to settle a class action lawsuit brought in 2009 on behalf of investors who purchased or held BAC securities at the time the company announced plans to acquire Merrill Lynch.
The proposed settlement will be reviewed by Judge Kevin Castel in the United States District Court for the Southern District of New York, where the class action is pending.
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The amount to be paid under the proposed settlement will be covered by a combination of Bank of America's existing litigation reserves and incremental litigation expense to be recorded in the third quarter of 2012.
The company estimates total litigation expense will be about $1.6 billion for the three months ended September 30, 2012, which includes the incremental costs of the related settlement above previous accruals and other litigation-related items.
Litigation expense, improvements in the company's credit spreads and the U.K. tax charge are expected to negatively impact third-quarter reported EPS by about $0.28.
The company also expects its third-quarter results to be adversely impacted by about $1.9 billion (pretax) in negative fair value option (FVO) adjustments and debit valuation adjustments (DVA) related to the improvement in its credit spreads, and the previously reported charge of about $800 million to income tax expense for changes in the U.K. corporate tax rate and the related effect on the deferred tax asset valuation.
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"Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders. As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients," said Brian Moynihan, Chief Executive of Bank of America.
Plaintiffs had alleged, among other claims, that Bank of America and certain of its officers made false or misleading statements about the financial health of Bank of America and Merrill Lynch.
Bank of America denies the allegations and is entering into this settlement to eliminate the uncertainties, burden and expense of further protracted litigation.
BAC closed Thursday's regular session at $8.97. The stock has been trading between $4.92 and $10.10 for the past 52 weeks.