|
Pricing
Supplement
(To Prospectus dated December 31, 2019
and
Series A Prospectus Supplement dated December 31,
2019)
June 30, 2022
BofA
Finance LLC
|
Filed
Pursuant to Rule 424(b)(2)
Registration Statement No. 333-234425
|
$2,000,000
5-Year Notes with Contingent
Interest Linked to the 2-Year U.S. Dollar SOFR ICE Swap
Rate®,
due July 6, 2027
Fully and Unconditionally Guaranteed by Bank of America
Corporation
|
· |
The CUSIP number for the notes is
09709T6T3. |
|
· |
The notes are unsecured senior
notes issued by BofA Finance LLC (“BofA Finance”), a direct,
wholly-owned subsidiary of Bank of America Corporation (“BAC” or
the “Guarantor”). The notes are fully and unconditionally
guaranteed by the Guarantor. |
|
· |
The notes are designed for
investors who wish to receive contingent quarterly interest income
where the amount of such interest will depend on the U.S. Dollar
SOFR ICE Swap Rate® for a tenor of 2 years (the “2y SOFR
Swap Rate”) as of the applicable interest determination date +
1.00%. Interest for an interest period will only be payable if the
closing level of the S&P 500® Index (the “SPX”) on
the applicable interest determination date is greater than or equal
to the Threshold Value. |
|
· |
The “Threshold Value” of the SPX
will equal 50% of the Starting Value of the SPX. The Starting Value
of the SPX is 3,785.38, which is equal to its closing level on the
pricing date. |
|
· |
The notes priced on June 30, 2022
(the “pricing date”). The notes will mature on July 6,
2027. |
|
· |
Interest, if payable, will be paid
quarterly in arrears on January 6, April 6, July 6 and October 6 of
each year, beginning on October 6, 2022 and ending on the maturity
date. |
|
· |
The U.S. Dollar SOFR ICE Swap
Rate® for all available tenors was launched by ICE
Benchmark Administration Limited (“IBA”) for use as a benchmark on
November 8, 2021. The rate and other information about this
benchmark that is publicly available is limited. For additional
information about the U.S. Dollar SOFR ICE Swap Rate®,
see the discussion beginning on page PS-26 under the heading “U.S.
Dollar SOFR ICE Swap Rate® and its
Methodology.” |
|
· |
At maturity, you will receive a
cash payment equal to the principal amount of the notes, plus any
accrued but unpaid interest. |
|
· |
The notes will not be listed on
any securities exchange. |
|
· |
The notes will be offered at
varying public offering prices related to prevailing market prices.
The public offering price will include accrued interest from July
6, 2022, if settlement occurs after that date. |
|
· |
The initial estimated value of
the notes will be less than the public offering price. The
initial estimated value of the notes as of the pricing date is
$976.00 per $1,000 in principal amount of notes. See “Summary”
beginning on page PS-4 of this pricing supplement, “Risk Factors”
beginning on page PS-7 of this pricing supplement and “Structuring
the Notes” on page PS-36 of this pricing supplement for additional
information. The actual value of your notes at any time will
reflect many factors and cannot be predicted with
accuracy. |
The notes and the related guarantee:
|
Are Not FDIC
Insured |
Are Not Bank
Guaranteed |
May Lose Value |
|
|
Per Note |
Total |
|
Public Offering
Price(1) |
$ |
1,000.00 |
$ |
2,000,000.00 |
|
Underwriting
Discount(1)(2)(3) |
$ |
10.00 |
$ |
20,000.00 |
|
Proceeds (before expenses) to BofA
Finance(3) |
$ |
990.00 |
$ |
1,980,000.00 |
(1) Certain dealers who purchase the notes for sale to certain
fee-based advisory accounts and/or eligible institutional investors
may forgo some or all of their selling concessions, fees or
commissions. The price to public for investors purchasing the notes
in these accounts may be as low as $990.00 (99.00%) per $1,000 in
principal amount of the notes. See “Supplemental Plan of
Distribution; Role of BofAS and Conflicts of Interest” in this
pricing supplement.
(2) We or one of our affiliates may pay varying selling concessions
of up to 1.00% in connection with the distribution of the notes to
other registered broker dealers.
(3) The underwriting discount per $1,000 in principal amount of the
notes may be as high as $10.00, resulting in proceeds, before
expenses, to BofA Finance of as low as $990.00 per $1,000 in
principal amount of the notes. The total underwriting discount and
proceeds, before expenses, to BofA Finance specified above reflect
the aggregate of the underwriting discounts per $1,000 in principal
amount of the notes.
The notes and the related guarantee of the notes by the
Guarantor are unsecured and are not savings accounts, deposits, or
other obligations of a bank. The notes are not guaranteed by Bank
of America, N.A. or any other bank, are not insured by the Federal
Deposit Insurance Corporation (the “FDIC”) or any other
governmental agency. Potential purchasers of the notes should
consider the information discussed in “Risk Factors” beginning on
page PS-7 of this pricing supplement, page S-5 of the accompanying
prospectus supplement, and page 7 of the accompanying prospectus.
There are important differences between the notes and a
conventional debt security, including different investment risks
and certain additional costs. Certain risks relating to the 2y SOFR
Swap Rate and the interest rate on the notes are discussed under
the heading “Risk Factors—Risks Related to the 2y SOFR Swap Rate”
beginning in page PS-7 of this pricing supplement.
None of the Securities and Exchange Commission, any state
securities commission, or any other regulatory body has approved or
disapproved of these notes or the guarantee, or passed upon the
adequacy or accuracy of this pricing supplement, or the
accompanying prospectus supplement or prospectus. Any
representation to the contrary is a criminal offense.
We will deliver the notes in book-entry form only through The
Depository Trust Company on or about July 6, 2022 against payment
in immediately available funds.
BofA Securities
Selling Agent
EXPLANATORY
NOTES
The U.S. Dollar SOFR ICE Swap
Rate® is
administered by ICE Benchmark Administration Limited (“IBA”).
Disclosure in this pricing supplement regarding the U.S. Dollar
SOFR ICE Swap Rate® and IBA is based on information publicly
available on IBA’s website at
https://www.theice.com/iba/ice-swap-rate (including any successor
or replacement source, the “ICE Swap Rate®
Website”). The foregoing
Internet website address is an inactive textual reference only, and
neither the ICE Swap Rate® Website, other pages on IBA’s website to
which the ICE Swap Rate® Website may contain hyperlinks, nor any of
the information or materials available thereon, are incorporated by
reference into this pricing supplement. In addition, the historical
rate information set forth in the section “Information About the
U.S. Dollar SOFR ICE Swap Rate® And Its Methodology—Historical Levels of 2Y
SOFR Swap Rate” has been obtained from information available by
paid subscription to the Bloomberg Professional Services service.
Neither we nor the selling agent have independently verified the
accuracy or completeness of any information publicly available on
the ICE Swap Rate Website with respect to the U.S. Dollar SOFR ICE
Swap Rate® and
IBA, or any historical rate information obtained from the Bloomberg
Professional Services service, in connection with the offer and
sale of the notes, and neither we nor they make any representation
that such publicly available information is accurate or
complete.
Capitalized or other defined
terms used, but not defined, in this pricing supplement have the
respective meanings as are given to them in the accompanying
prospectus supplement or the accompanying prospectus, as
applicable. Capitalized or other defined terms used and defined in
this pricing supplement are sometimes defined after their first use
without a reference such as “as defined in this pricing
supplement.” Unless otherwise indicated or unless the context
requires otherwise, all references in this pricing supplement to
“we,” “us,” “our,” or similar references are to BofA Finance, and
not to BAC (or any other affiliate of BofA Finance).
The above referenced prospectus
and prospectus supplement may be accessed at the link set forth at
the bottom of the cover page of this pricing supplement.
PS-2
TABLE
OF CONTENTS
| |
Page |
|
SUMMARY
|
PS-4
|
|
RISK
FACTORS
|
PS-7
|
|
DESCRIPTION
OF THE NOTES
|
PS-20
|
|
INFORMATION
ABOUT U.S. DOLLAR SOFR ICE SWAP RATE® AND ITS
METHODOLOGY
|
PS-27
|
|
INFORMATION
ABOUT THE SPX
|
PS-29
|
|
SUPPLEMENTAL
PLAN OF DISTRIBUTION; ROLE OF BOFAS AND CONFLICTS OF
INTEREST
|
PS-33
|
|
STRUCTURING
THE NOTES
|
PS-36
|
|
VALIDITY
OF THE NOTES
|
PS-36
|
|
U.S.
FEDERAL INCOME TAX SUMMARY
|
PS-38
|
PS-3
SUMMARY
The 5-Year Notes with Contingent Interest Linked to the 2-Year U.S.
Dollar SOFR ICE Swap Rate®, due July 6, 2027 (the
“notes”) are senior debt securities issued by BofA Finance, and the
payment obligations of BofA Finance under the notes are fully and
unconditionally guaranteed by BAC. The notes and the related
guarantee are not guaranteed or insured by the FDIC or secured by
collateral. The notes will rank equally in right of payment with
all of our other unsecured senior and unsubordinated obligations,
and the related guarantee will rank equally in right of payment
with all of BAC’s other unsecured and unsubordinated obligations,
in each case except obligations that are subject to any priorities
or preferences by law. Any payments due on the notes, including any
repayment of the principal amount, will be subject to the credit
risk of BofA Finance, as issuer, and BAC, as guarantor.
You should read carefully this entire pricing supplement, and the
applicable information in, and incorporated by reference into, the
accompanying prospectus supplement and prospectus, as applicable,
to understand fully the terms of the notes, as well as the tax and
other considerations important to you in making a decision about
whether to invest in the notes. In particular, you should review
carefully the section in this pricing supplement entitled “Risk
Factors,” which highlights a number of risks of an investment in
the notes, to determine whether an investment in the notes is
appropriate for you, including risks relating to the 2y SOFR Swap.
Information in this pricing supplement that is inconsistent with
information in the accompanying prospectus supplement or prospectus
will supersede such information in those documents. You are urged
to consult with your own attorneys and business and tax advisors
before making a decision to purchase any of the notes.
The information in this “Summary” section is qualified in its
entirety by the more detailed explanation set forth elsewhere in
this pricing supplement and the accompanying prospectus supplement
and prospectus. We have not authorized anyone to provide any
information other than that contained or incorporated by reference
in this pricing supplement and the accompanying prospectus
supplement and prospectus. We take no responsibility for, and can
provide no assurance as to the reliability of, any other
information that others may provide. None of us, the Guarantor or
any selling agent is making an offer to sell these notes in any
jurisdiction where the offer or sale is not permitted. You should
not assume that the information in this pricing supplement and the
accompanying prospectus supplement and prospectus is accurate as of
any date other than the date on the front of this pricing
supplement or the accompanying prospectus supplement or prospectus,
as applicable.
|
·
Title of the
Series: |
5-Year Notes with Contingent Interest Linked to the 2-Year U.S.
Dollar SOFR ICE Swap Rate®, due July 6, 2027.
|
| ·
Issuer: |
BofA Finance LLC (“BofA Finance”)
|
| ·
Guarantor: |
Bank of America Corporation (“BAC” or the “Guarantor”)
|
| ·
Pricing Date: |
June 30, 2022
|
| ·
Issue Date: |
July 6, 2022
|
| ·
Maturity Date: |
July 6, 2027
|
| ·
Minimum
Denominations: |
$1,000 and multiples of $1,000 in excess of $1,000
|
|
·
Interest Periods: |
Quarterly. Each interest period (other than the first interest
period, which will begin on the issue date) will begin on, and will
include, an interest payment date, and will extend to, but will
|
PS-4
|
|
exclude, the next succeeding interest payment date or the maturity
date, as applicable.
|
|
·
Interest Determination
Dates: |
With respect to each interest period, the second U.S. government
securities business day preceding the interest payment date for
such interest period.
Interest for each interest period will be determined in arrears at
the end of each interest period.
|
|
·
Interest Payment
Dates: |
Interest, if payable, will be paid on January 6, April 6, July 6
and October 6 of each year, beginning on October 6, 2022. The final
interest payment, if payable, will occur on the maturity date.
|
|
·
Interest Rates: |
For each interest period, interest will accrue quarterly at a rate
per annum equal to 2y SOFR Swap Rate + 1.00% if, and only if the
Observation Value of the SPX on the applicable interest
determination date is greater than or equal to the Threshold Value.
If the Observation Value of the SPX on the applicable interest
determination date is less than the Threshold Value, no interest
will be payable or will accrue with respect to the applicable
interest period.
The interest rate payable on the notes during these quarterly
interest periods may be less than the interest that is payable on a
conventional debt security.
|
|
·
Starting Value: |
3,785.38, which is the closing level
of the SPX on the pricing date. |
|
·
Observation Value: |
The closing level of the SPX on the
applicable interest determination date, subject to postponement in
the event of a Market Disruption Event or non-Trading
Day. |
|
·
Threshold Value: |
1,892.69, which is 50% of the
Starting Value. |
|
·
Day Count Convention:
|
30/360 |
|
·
SPX
|
The S&P 500 Index (Bloomberg
symbol: SPX), a price return index. For additional information
about the SPX, please see the section in this pricing supplement
entitled "Information About the SPX". |
|
·
2y SOFR Swap Rate: |
“2y SOFR Swap Rate” means the U.S. Dollar SOFR ICE Swap
Rate® for a tenor of 2 years as of the applicable
interest determination date.
For additional information about 2y SOFR Swap Rate, please see the
section in this pricing supplement entitled “Description of the
Notes—Interest—Determination of U.S. Dollar SOFR ICE Swap
Rate®.”
|
|
·
Unavailability of the 2y SOFR Swap
Rate: |
If, on any interest determination date, 2y SOFR Swap Rate does not
appear on the Designated SOFR Swap Rate Page at approximately 12:15
p.m., New York City time, or if we or the calculation agent (after
consulting with us) determines that a SOFR Swap Rate Transition
Event and related SOFR Swap Rate Replacement Date have occurred
with respect to such rate, then the 2y SOFR Swap Rate for such date
will be determined as described under “Description of the
Notes—Interest—Determination of U.S. Dollar SOFR ICE Swap
Rate®” in this pricing supplement.
|
|
·
Payment at
Maturity: |
The payment at maturity will equal the principal amount of the
notes, plus any accrued but unpaid interest.
|
PS-5
|
·
Early Redemption at Our
Option: |
None
|
|
·
Repayment at Option of
Holder:
|
None
|
|
·
Business Day Convention; Business
Days: |
If
any interest payment date or the maturity date occurs on a day that
is not a business day in New York, New York, then the payment will
be postponed until the next business day in New York, New York. No
additional interest will accrue on the notes as a result of such
postponement, and no adjustment will be made to the length of the
relevant interest period.
A
“business day” means any day other than a day on which banking
institutions in New York, New York are authorized or required by
law, regulation, or executive order to close or a day on which
transactions in U.S. dollars are not conducted.
|
|
·
Record Dates for Interest
Payments: |
For book-entry only notes, one business day in New York, New York
prior to the payment date. If notes are not held in book-entry only
form, the record dates will be the fifteenth calendar day preceding
such interest payment day, whether or not such record date is a
business day.
|
|
·
Calculation Agent: |
Merrill Lynch Capital Services, Inc. (“MLCS”)
|
|
·
Listing: |
None
|
|
·
Initial Estimated
Value: |
Payments on the notes depend on the credit risk of BofA Finance, as
issuer, and BAC, as guarantor, and on the performance of the SPX
and the 2y SOFR Swap Rate. The economic terms of the notes are
based on BAC’s internal funding rate, which is the rate BAC would
pay to borrow funds through the issuance of market-linked notes,
and the economic terms of certain related hedging arrangements it
enters into. BAC’s internal funding rate is typically lower than
the rate it would pay when it issues conventional fixed or floating
rate debt securities. This difference in funding rate, as well as
the underwriting discount and the hedging related charges described
below, reduced the economic terms of the notes to you and the
initial estimated value of the notes. Due to these factors, the
public offering price you are paying to purchase the notes is
greater than the initial estimated value of the notes.
On
the cover page of this pricing supplement, we have provided the
initial estimated value for the notes as of the pricing date. For
more information about the initial estimated value and the
structuring of the notes, see “Risk Factors” beginning on page PS-7
and “Structuring the Notes” on page PS-36.
|
RISK FACTORS
Your investment in the notes entails significant risks, many of
which differ from those of a conventional debt security. Your
decision to purchase the notes should be made only after
carefully
PS-6
considering the risks of an investment in the notes, including
those discussed below, with your advisors in light of your
particular circumstances. The notes are not an appropriate
investment for you if you are not knowledgeable about significant
elements of the notes or financial matters in general. You should
carefully review the more detailed explanation of risks relating to
the notes in the “Risk Factors” sections beginning on page S-5 of
the accompanying prospectus supplement and page 7 of the
accompanying prospectus.
Risks Related to the 2y SOFR Swap Rate
IBA launched the U.S. Dollar SOFR ICE Swap Rate®
for use as a benchmark in order to aid the market’s transition
to SOFR and away from U.S. dollar LIBOR. The following discussion
of certain risks relating to the notes is based on information
related to the U.S. Dollar SOFR ICE Swap Rate®
that is made publicly available on the ICE Swap Rate®
Website as of the date of this pricing supplement, which
information is subject to change at any time after such date. For
further information about the U.S. Dollar SOFR ICE Swap
Rate®, see “Information About U.S. Dollar SOFR
ICE Swap Rate® And Its Methodology.”
The U.S. Dollar SOFR ICE Swap Rate® is
a new benchmark that was launched by IBA on November 8, 2021. The
future performance of the U.S. Dollar SOFR ICE Swap
Rate® cannot be predicted based on the
limited historical information available.
IBA began publication of the U.S. Dollar SOFR ICE Swap
Rate® on November 8, 2021. As a result, there is
very limited historical information on which to evaluate the
performance of this benchmark or on which to base a prediction as
to its future performance, which may bear little or no relation to
such limited information. The very limited historical information
is not necessarily indicative of the future performance of the U.S.
Dollar SOFR ICE Swap Rate® or the value of the
notes, and any historical upward or downward trend in the level of
the U.S. Dollar SOFR ICE Swap Rate® during any
period is not an indication that the level of the benchmark is more
or less likely to increase or decrease over the term of the notes.
An investment in the notes may involve more risk than investing in
notes linked to benchmarks or indices with established performance
records, where a longer history of performance may be available so
that you have more information on which to base an investment
decision.
The composition of the U.S. Dollar SOFR ICE Swap
Rate® is not the same as the U.S. Dollar
LIBOR ICE Swap Rate®, and the U.S. Dollar
SOFR ICE Swap Rate® is not expected to be
a comparable substitute or replacement for the U.S. Dollar LIBOR
ICE Swap Rate®.
The U.S. Dollar LIBOR ICE Swap Rate® seeks to
represent the mid-price for the semi-annual fixed leg of an
interest rate swap where the floating leg is based on three-month
U.S. dollar LIBOR payable quarterly, calculated on the basis of a
360-day year consisting of twelve 30-day months. The U.S. Dollar
SOFR ICE Swap Rate® seeks to represent the annual
fixed leg of an interest rate swap where the floating leg is based
on a compounded average of the daily Secured Overnight Financing
Rate (“SOFR”) administered by the Federal Reserve Bank of New York
(the “New York Fed”) (or any successor administrator) compounded in
arrears for twelve months payable annually using standard market
conventions, calculated on the basis of the actual number of days
elapsed, with a year presumed to comprise 360 days. The composition
and characteristics of this SOFR rate are not the same as those of
three-month U.S. dollar LIBOR, nor is this SOFR rate the economic
equivalent of three-month U.S. dollar LIBOR. Thus, the U.S. Dollar
SOFR ICE Swap Rate® has been designed with
respect to swap transactions referencing a rate that differs in
significant respects from the rate referenced in the swap
transactions with respect to which the U.S. Dollar LIBOR ICE Swap
Rate® was designed. As a result, the interest
rate on and value of the notes may perform differently over time
from the manner in which the interest rate and value of notes with
comparable terms and provisions that were linked to the U.S. Dollar
LIBOR ICE Swap Rate® would perform.
PS-7
A lack of input data may impact IBA’s ability to calculate and
publish the SOFR ICE Swap Rate® for one or more
tenors.
The input data for the U.S. Dollar SOFR ICE Swap
Rate® is based on swaps referencing SOFR as the
floating leg. The U.S. Dollar SOFR ICE Swap Rate®
is dependent on receiving sufficient eligible input data, from the
trading venue sources identified by IBA in accordance with the
“Waterfall” methodology for each applicable U.S. Dollar SOFR ICE
Swap Rate® tenor. The ability of the applicable
trading venues to provide sufficient eligible input data in
accordance with the Waterfall methodology depends on, among other
things, there being a liquid market in swap contracts referencing
SOFR on such trading venues, which in turn depends, among other
things, on there being a liquid market in loans, floating rate
notes and other financial contracts referencing SOFR. Because
SOFR’s use as a reference rate for financial contracts began
relatively recently and the related market for SOFR-based swaps is
relatively new, there is limited information on which to assess
potential future liquidity in SOFR-based swap markets or in the
market for SOFR-based financial contracts more generally. If the
market for SOFR-based swap contracts is not sufficiently liquid, or
if the liquidity in such market proves to be volatile, this could
result in the inability of IBA to calculate the U.S. Dollar SOFR
ICE Swap Rate® on certain occasions, which could
materially adversely affect the reliability of U.S. Dollar SOFR ICE
Swap Rate®, and could adversely affect the return on and
value of the notes and the price at which you are able to sell the
notes in the secondary market, if any. In addition, if SOFR does
not maintain market acceptance for use as a reference rate for U.S.
dollar denominated financial contracts, uncertainty about SOFR may
adversely affect the return on and the value of the notes.
The information regarding the U.S. Dollar SOFR ICE Swap
Rate® that IBA makes publicly available is
limited.
Certain information and materials relating to the U.S. Dollar SOFR
ICE Swap Rate® are available on ICE Swap
Rate® Website. Currently, publicly available rate
information for the U.S. Dollar SOFR ICE Swap Rate® can
be viewed only on the ICE Report Center on the ICE Swap
Rate® Website, and, for any particular day, the only
rate available for viewing is the rate published for the preceding
publication day. In addition, as of the date of this pricing
supplement, such rate appearing on the ICE Report Center is rounded
to two decimal places and does not represent the actual U.S. Dollar
SOFR ICE Swap Rate® rates that will be used to determine
the 2y SOFR Swap Rate for purposes of calculating interest on the
notes (which rates will be those published on the Designated SOFR
Swap Rate Page and rounded to three decimal places). As of the date
of this pricing supplement, a paid subscription to the Bloomberg
Professional Services service is required to obtain additional U.S.
Dollar SOFR ICE Swap Rate® data (such as historical U.S.
Dollar SOFR ICE Swap Rate® rates rounded to three
decimal places). IBA has not indicated whether such information
will become publicly available in the future or the U.S. Dollar
SOFR ICE Swap Rate® will be made available from another
source. As a result of this limited publicly available information,
it may be difficult for you to determine the applicable U.S. Dollar
SOFR ICE Swap Rate® for a specific date or
dates.
The 2y SOFR Swap Rate may be modified or discontinued, which
could adversely affect the return on, value of or market for the
notes.
IBA (or any successor administrator) may make methodological or
other changes that could change the value of 2y SOFR Swap Rate,
including changes related to the method by which such rate is
calculated, eligibility criteria applicable to the transactions
used to calculate such rates, including the trading venues for such
transactions, or timing related to the determination or publication
of such rates, or may cease the calculation or dissemination of
such rates. Depending on the circumstances, such change or
cessation could be implemented with little or no public notice or
consultation. Any such changes may result in a reduction of the 2y
SOFR Swap Rate and, in turn, reduce the amount of interest payable
on the notes, which may adversely affect the return on, value of
and market for of the notes. In addition, the 2y SOFR Swap Rate is
determined by IBA based on data received from sources other than
BofA Finance or BAC, and
PS-8
neither BofA Finance nor BAC has any control over the methods of
calculation, publication schedule, rate revision practices or
availability of such data.
If the 2y SOFR Swap Rate does not appear on the Designated SOFR
Swap Rate Page at the specified time, and a SOFR Swap Rate
Transition Event and related SOFR Swap Rate Replacement Date have
not occurred, the applicable rate will be determined by the
calculation agent (which is one of our affiliates) using
alternative methods, which will involve the exercise of discretion
by the calculation agent.
If the 2y SOFR Swap Rate does not appear on the Designated SOFR
Swap Rate Page at the specified time on an applicable interest
determination date (for example, as a result of insufficient
liquidity in the underlying applicable SOFR swap contracts market)
and a SOFR Swap Rate Transition Event and related SOFR Swap Rate
Replacement Date have not occurred with respect to the 2y SOFR Swap
Rate the calculation agent will determine the 2y SOFR Swap Rate for
such applicable interest determination date in its sole discretion,
after consulting such sources as it deems comparable to the
Designated SOFR Swap Rate Page or to the sources from which the
administrator of such rate obtains the swap rate input data used by
the administrator to calculate such rate, or any other source or
data it determines to be reasonable (including, if applicable, the
2y SOFR Swap Rate that was most recently published by the
administrator of such rate) for the purpose of estimating such
rate. This method of determining the 2y SOFR Swap Rate may result
in interest payments on the notes that are higher than, lower than
or that do not otherwise correlate over time with the interest
payments that would have been made on the notes if the 2y SOFR Swap
Rate had been published in accordance with IBA’s (or any successor
administrator’s) usual policies and procedures governing
determination and publication of the such rate and appeared on the
Designated SOFR Swap Rate Page at the specified time. In addition,
in determining the 2y SOFR Swap Rate in this manner, the
calculation agent, will have no obligation to consider your
interests as an investor in the notes and may have economic
interests that are adverse to your interests.
If a SOFR Swap Rate Transition Event and related SOFR Swap Rate
Replacement Date are determined to have occurred with respect to
the 2y SOFR Swap Rate, the SOFR Swap Rate Replacement may not be a
suitable replacement for such rate.
If we or the calculation agent (after consulting with us)
determines that a SOFR Swap Rate Transition Event and related SOFR
Swap Rate Replacement Date have occurred with respect to the 2y
SOFR Swap Rate, then the applicable SOFR Swap Rate Replacement will
replace the 2y SOFR Swap Rate for all purposes relating to the
notes in respect of such determination on such date and all
determinations on all subsequent dates, as described under
“Description of the Notes—Interest—Determination of U.S. Dollar
SOFR ICE Swap Rate®” in this pricing supplement. The
SOFR Swap Rate Replacement will be the alternate interest rate that
has been selected by us or the calculation agent (after consulting
with us) as an industry-accepted replacement for the 2y SOFR Swap
Rate for U.S. dollar-denominated floating-rate notes at such time,
plus the applicable SOFR Swap Rate Replacement Adjustment (if any).
If we or the calculation agent (after consulting with us)
determines that there is no such replacement rate as of any
applicable date of determination, then the 2y SOFR Swap Rate will
be determined by us or the calculation agent (after consulting with
us), after consulting such sources as it deems comparable to the
Designated SOFR Swap Rate Page or to the sources from which the
administrator of such rate obtains the swap rate input data used by
the administrator to calculate such rate, or any other source or
data it determines to be reasonable (including, if applicable, the
2y SOFR Swap Rate that was most recently published by the
administrator of such rate) for the purpose of estimating such
rate. After determination of the SOFR Swap Rate Replacement,
interest on the notes no longer will be determined by reference to
the applicable 2y SOFR Swap Rate but instead will be determined by
reference to the applicable SOFR Swap Rate Replacement.
There is no assurance that any SOFR Swap Rate Replacement will be
similar to the 2y SOFR Swap Rate in any respect as it is determined
and published by IBA as of the date of this
PS-9
pricing supplement, or that any SOFR Swap Rate Replacement will
produce the economic equivalent of the 2y SOFR Swap Rate as a
reference rate for determining the interest rate on the notes or
otherwise be a suitable replacement or successor for such rate. In
addition, it is possible that, at the time of the occurrence of a
SOFR Swap Rate Replacement Event and related SOFR Swap Rate
Replacement Date, no industry-accepted interest rate as a
replacement for the 2y SOFR Swap Rate will exist and there may be
disagreement regarding the selection of a replacement rate for the
2y SOFR Swap Rate. Notwithstanding the foregoing, the determination
of the SOFR Swap Rate Replacement will become effective without
your consent or the consent of any other party. Use of the SOFR
Swap Rate Replacement may result in interest payments on the notes
that are higher than, lower than or that do not otherwise correlate
over time with the interest payments that would have been made on
such notes in the absence of a SOFR Swap Rate Transition Event and
related SOFR Swap Rate Replacement Date.
In addition, although the applicable swap rate transition
provisions set forth in this pricing supplement under set forth
under “Description of the Notes—Interest—Determination of U.S.
Dollar SOFR ICE Swap Rate®” provide for a SOFR Swap Rate
Replacement Adjustment to be added to the Unadjusted SOFR Swap Rate
Replacement, such SOFR Swap Rate Replacement Adjustment may be zero
or negative, and there is no guarantee that the SOFR Swap Rate
Replacement Adjustment (if any) will make the Unadjusted SOFR Swap
Rate Replacement equivalent to the 2y SOFR Swap Rate as it is
calculated and published by IBA as of the date of this pricing
supplement.
The secondary trading market for notes referencing the U.S.
Dollar SOFR ICE Swap Rate® may be
limited.
Publication of the U.S. Dollar SOFR ICE Swap
Rate® began on November 8, 2021 and as of the
date of this pricing supplement, use of this rate as a reference
rate for floating rate notes is very limited. In addition, such
rate may not be widely used as such in the future. If the U.S.
Dollar SOFR ICE Swap Rate® does not prove to be
widely used as a benchmark in securities that are similar or
comparable to the notes, a trading market for the notes may fail to
develop or be maintained, and the trading price of the notes may be
lower than those of debt securities with interest rates based on
rates that are more widely used.
We or our affiliates may publish research that could affect the
market value of the notes.
We
or one or more of our affiliates may, at present or in the future,
publish research reports with respect to movements in interest
rates generally, or the 2y SOFR Swap Rate specifically. This
research may be modified from time to time without notice and may
express opinions or provide recommendations that are inconsistent
with purchasing or holding the notes. Any of these activities may
affect the market value of the notes.
Structure-related Risks
Your return on the notes may be less than the yield on a
conventional debt security of comparable maturity. The return
that you receive on the notes may be less than the return you would
earn if you purchased a conventional debt security with the same
maturity date. As a result, your investment in the notes may not
reflect the full opportunity cost to you when you consider factors
that affect the time value of money.
The interest payable on the notes during any quarterly interest
period will not reflect changes in the level of the SPX or the 2y
SOFR Swap Rate other than on the interest determination dates.
Changes in the level of the SPX or the 2y SOFR Swap Rate during the
term of the notes other than on the interest determination dates
will not affect the interest payable, if any, on the notes. The
calculation agent will determine whether interest is payable and
calculate the interest payable, if any, during any quarterly
interest period based on the levels of the SPX
PS-10
and the 2y SOFR Swap Rate on the interest determination dates. No
other levels of the SPX or the 2y SOFR Swap Rate will be taken into
account.
You may not receive an interest payment on one or more interest
payment dates or the notes may pay interest at a floating rate that
may be as low as 0.00% per annum on one or more interest payment
dates. For each interest period, interest will accrue quarterly
at a rate per annum equal to 2y SOFR Swap Rate + 1.00% only if the
Observation Value of the SPX on the applicable interest
determination date is greater than or equal to the Threshold Value.
If the Observation Value of the SPX on the applicable interest
determination date is less than the Threshold Value, no interest
will be payable with respect to the applicable interest period.
Even if the Observation Value of the SPX is greater than or equal
to the Threshold Value on the applicable interest determination
date, the rate at which the notes will bear interest during each
quarterly interest period will depend on the level of the 2y SOFR
Swap Rate. As a result, the interest payable on the notes, if any,
will vary with fluctuations in the level of both the SPX and the 2y
SOFR Swap Rate. It is impossible to predict whether the level of
either the SPX or the 2y SOFR Swap Rate will rise or fall or the
amount of interest payable, if any, on the notes. As a result of
the foregoing, you may receive minimal or no interest for extended
periods of time or even throughout the remaining term of the notes.
The interest rate that will apply at any time on the notes may be
more or less than other prevailing market interest rates at such
time. As a result, the amount of interest you receive on the notes
may be less than the return you could earn on other
investments.
Interest payments due on the notes, if any, will be determined
only at the end of the relevant interest period. Interest
payments due on the notes, if any, will be determined only at the
end of the relevant interest period. Therefore, investors in the
notes will not know the amount of interest payable with respect to
each interest period, if any, until shortly prior to the related
interest payment date, and it may be difficult for investors in the
notes to estimate reliably the amounts of interest that will be
payable on each such interest payment date at the beginning of or
during the relevant interest period. In addition, some investors
may be unwilling or unable to trade the notes without changes to
their information technology systems, which could adversely impact
the liquidity and trading price of the notes.
All payments on the notes are subject to our credit risk and the
credit risk of the Guarantor, and actual or perceived changes in
our or the Guarantor’s creditworthiness are expected to affect the
value of the notes. The notes are our senior unsecured debt
securities. All payments on the notes will be fully and
unconditionally guaranteed by the Guarantor. The notes are not
guaranteed by any entity other than the Guarantor. As a result,
your receipt of all payments of interest and principal on the notes
will be dependent upon our ability and the ability of the Guarantor
to repay our respective obligations under the notes on the
applicable payment date, regardless of the level of the SPX or the
2y SOFR Swap Rate. No assurance can be given as to what our
financial condition or the financial condition of the Guarantor
will be at any time during the term of the notes or on the maturity
date. If we and the Guarantor become unable to meet our respective
financial obligations as they become due, you may not receive the
amounts payable under the terms of the notes.
In addition, our credit ratings and the credit ratings of the
Guarantor are assessments by ratings agencies of our respective
abilities to pay our obligations. Consequently, our or the
Guarantor’s perceived creditworthiness and actual or anticipated
decreases in our or the Guarantor’s credit ratings or increases in
the spread between the yield on our respective securities and the
yield on U.S. Treasury securities (the “credit spread”) prior to
the maturity date of the notes may adversely affect the market
value of the notes. However, because your return on the notes
depends upon factors in addition to our ability and the ability of
the Guarantor to pay our respective obligations, such as the levels
of the SPX and the 2y SOFR Swap Rate during the term of the notes,
an improvement in our or the Guarantor’s credit ratings will not
reduce the other investment risks related to the notes.
PS-11
We are a finance subsidiary and, as such, have no independent
assets, operations or revenues. We are a finance subsidiary of
BAC, have no operations other than those related to the issuance,
administration and repayment of our debt securities that are
guaranteed by the Guarantor, and are dependent upon the Guarantor
and/or its other subsidiaries to meet our obligations under the
notes in the ordinary course. However, we will have no assets
available for distributions to holders of the notes if they make
claims in respect of such notes in a bankruptcy, resolution or
similar proceeding. Accordingly, any recoveries by such holders in
respect of such claims will be limited to those available under the
Guarantor’s guarantee of such notes, and any obligations under that
guarantee will rank equally in right of payment with all other
unsecured and unsubordinated obligations of the Guarantor, except
obligations that are subject to any priorities or preferences by
law, and senior in right of payment to the Guarantor’s subordinated
obligations. Holders of the notes will have recourse only to a
single claim against the Guarantor and its assets under the
Guarantor’s guarantee of the notes, and holders of the notes should
accordingly assume that in any bankruptcy, resolution or similar
proceeding, they would not have priority over, and should be
treated equally with, the claims of all other unsecured and
unsubordinated obligations of the Guarantor, including claims of
holders of unsecured senior debt securities issued by the
Guarantor.
The Guarantor’s ability to make payments under its guarantee of
the notes will depend upon its receipt of funds from its
subsidiaries, and applicable laws and regulations, and actions
taken under the Guarantor’s resolution plan, could restrict the
ability of its subsidiaries to transfer such funds. The
Guarantor is a holding company and conducts substantially all of
its operations through its subsidiaries. The Guarantor’s ability to
make payments under its guarantee of our payment obligations on the
notes depends upon the Guarantor’s receipt from its subsidiaries of
dividends and other distributions, loans, advances and other
payments. Any inability of these subsidiaries to pay dividends or
make payments to the Guarantor may adversely affect the Guarantor’s
cash flow and financial condition. Many of these subsidiaries,
including bank and broker-dealer subsidiaries, are subject to laws
that restrict dividend payments or authorize regulatory bodies to
block or reduce the flow of funds from those subsidiaries to the
Guarantor or to its other subsidiaries. In addition, the
Guarantor’s bank and broker-dealer subsidiaries are subject to
restrictions on their ability to lend or transact with affiliates
and to minimum regulatory capital and liquidity requirements. Lower
earnings in these subsidiaries can reduce the amount of funds
available to the Guarantor. Adverse business and economic
conditions, including changes in interest and currency exchange
rates, illiquidity or volatility in areas where the Guarantor has
concentrated credit risk, and a failure in or breach of its
operational or security systems or infrastructure, could affect its
businesses and results of operations. Intercompany arrangements the
Guarantor has entered into in connection with its resolution
planning could restrict the amount of funding available to it from
its subsidiaries under certain adverse conditions, as described
below under “—A resolution under the Guarantor’s preferred single
point of entry resolution strategy could materially adversely
affect its liquidity and financial condition and its ability to
make payments under its guarantee of our payment obligations on the
notes.” These restrictions could prevent the Guarantor’s
subsidiaries from paying dividends or making other distributions to
the Guarantor or otherwise providing funds to the Guarantor that
the Guarantor needs in order to make payments under its guarantee
of our payment obligations on the notes. Also, the Guarantor’s
right to participate in any distribution of assets of any of its
subsidiaries upon such subsidiary’s liquidation or otherwise will
be subject to the prior claims of creditors of that subsidiary,
except to the extent that any of the Guarantor’s claims as a
creditor of such subsidiary may be recognized.
A resolution under the Guarantor’s preferred single point of
entry resolution strategy could materially adversely affect its
liquidity and financial condition and its ability to make payments
under its guarantee of our payment obligations on the notes.
The Guarantor is required periodically to submit a plan to its
primary regulatory authorities describing its resolution strategy
under the U.S. Bankruptcy Code in the event of material financial
distress or failure. In the Guarantor’s current plan, its preferred
resolution strategy is a single point of entry strategy. This
strategy provides that only the Guarantor (the parent holding
company) files for
PS-12
resolution under the U.S. Bankruptcy Code and contemplates
providing certain key operating subsidiaries with sufficient
capital and liquidity to operate through severe stress and to
enable such subsidiaries to continue operating or be wound down in
a solvent manner following a Guarantor bankruptcy. The Guarantor
has entered into intercompany arrangements governing the
contribution of capital and liquidity with these key subsidiaries.
As part of these arrangements, the Guarantor has transferred most
of its assets (and has agreed to transfer additional assets) to a
wholly-owned holding company subsidiary in exchange for a
subordinated note. Certain of the Guarantor’s remaining assets
secure its ongoing obligations under these intercompany
arrangements. The wholly-owned holding company subsidiary also has
provided a committed line of credit that, in addition to the
Guarantor’s cash, dividends and interest payments, including
interest payments the Guarantor receives in respect of the
subordinated note, may be used to fund the Guarantor’s obligations.
These intercompany arrangements include provisions to terminate the
line of credit, forgive the subordinated note and require the
Guarantor to contribute its remaining financial assets to the
wholly-owned holding company subsidiary if the Guarantor’s
projected liquidity resources deteriorate so severely that
resolution becomes imminent, which could materially and adversely
affect the Guarantor’s liquidity and ability to meet its payment
obligations, including under its guarantee of our payment
obligations on the notes. In addition, the Guarantor’s preferred
resolution strategy could result in holders of the notes being in a
worse position and suffering greater losses than would have been
the case under bankruptcy or other resolution scenarios or
plans.
Under Title II of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the “Financial Reform
Act”), when a global systemically important banking
organization (“G-SIB”), such as the Guarantor, is
in default or danger of default, the Federal Deposit Insurance
Corporation (“FDIC”) may be appointed receiver in order to
conduct an orderly liquidation of such institution. In the event of
such appointment, the FDIC could, among other things, invoke the
orderly liquidation authority, instead of the U.S. Bankruptcy Code,
if the Secretary of the U.S. Department of Treasury makes certain
financial distress and systemic risk determinations. In 2013, the
FDIC issued a notice describing its preferred “single point of
entry” strategy for resolving a G-SIB. Under this
approach, the FDIC could replace the Guarantor with a bridge
holding company, which could continue operations and result in an
orderly resolution of the underlying bank, but whose equity would
be held solely for the benefit of the Guarantor’s creditors. The
FDIC’s single point of entry strategy may result in holders of the
notes suffering greater losses than would have been the case under
a bankruptcy proceeding or a different resolution strategy with
respect to payments received under the Guarantors’ guarantee of the
notes.
The Guarantor’s obligations under its guarantee of the notes
will be structurally subordinated to liabilities of the Guarantor’s
subsidiaries. Because the Guarantor is a holding company, its
right to participate in any distribution of assets of any
subsidiary upon such subsidiary’s liquidation or reorganization or
otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be
recognized as a creditor of that subsidiary. As a result, any
obligations of the Guarantor under its guarantee of the notes will
be structurally subordinated to all existing and future liabilities
of the Guarantor’s subsidiaries, and claimants should look only to
the assets of the Guarantor for payments under the Guarantor’s
guarantee of the notes. Further, creditors of the Guarantor’s
subsidiaries recapitalized pursuant to the Guarantor’s resolution
plan generally would be entitled to payment of their claims from
the assets of the subsidiaries, including the Guarantor’s
contributed assets. In addition, any obligations of the Guarantor
under its guarantee of the notes will be unsecured and, therefore,
in a bankruptcy or similar proceeding, will effectively rank junior
to the Guarantor’s secured obligations to the extent of the value
of the assets securing such obligations.
Each of BofA Finance LLC and the Guarantor is permitted to sell,
convey or transfer all or substantially all of its assets to one or
more of the Guarantor’s majority-owned subsidiaries and, in either
such event, such subsidiary or subsidiaries will not be required
under the indenture relating to the notes to assume our obligations
under the notes or the Guarantor’s obligations under its guarantee
of the notes, as the case may be. We and the
PS-13
Guarantor each may sell, convey or transfer all or substantially
all of its assets to one or more entities that are direct or
indirect majority-owned subsidiaries of the Guarantor in which the
Guarantor and/or one or more of its subsidiaries owns more than 50%
of the combined voting power, and under the indenture under which
the notes will be issued, including the provisions thereof relating
to the Guarantor’s guarantee of the notes, such subsidiary or
subsidiaries will not be required to assume our obligations under
the notes or the Guarantor’s obligations under its guarantee
thereof, as the case may be. In either such event, (i) we will
remain the sole obligor on the notes and the Guarantor will remain
the sole obligor on the guarantee of the notes, as the case may be,
(ii) creditors of any such subsidiary or subsidiaries would have
additional assets from which to recover on their claims and (iii)
obligations of the Guarantor under its guarantee of our notes would
be structurally subordinated to creditors of such subsidiary or
subsidiaries with respect to such transferred assets. See
“Description of Debt Securities—Limitation on Mergers and Sales of
Assets” beginning on page 21 of the accompanying prospectus for
more information.
The notes issued by us will not have the benefit of any
cross-default or cross-acceleration with other indebtedness of BofA
Finance LLC or the Guarantor; events of bankruptcy or insolvency or
resolution proceedings relating to the Guarantor and covenant
breach by the Guarantor will not constitute an event of default
with respect to the notes. The notes issued by us will not have
the benefit of any cross-default or cross-acceleration with other
indebtedness of BofA Finance LLC or the Guarantor. In addition,
events of bankruptcy or insolvency or resolution or similar
proceedings relating to the Guarantor will not constitute an event
of default with respect to the notes. Furthermore, it will not
constitute an event of default with respect to the notes if the
guarantee by the Guarantor ceases to be in full force and effect
for any reason. Therefore, events of bankruptcy or insolvency or
resolution or similar proceedings relating to the Guarantor (in the
absence of any such event occurring with respect to us) will not
permit the notes to be declared due and payable. In addition, a
breach of a covenant by the Guarantor (including, for example, a
breach of the Guarantor’s covenants with respect to mergers or the
sale of all or substantially all its assets) will not permit the
notes to be declared due and payable. The value you receive on the
notes may be significantly less than what you otherwise would have
received had the notes been declared due and payable immediately
upon certain events of bankruptcy or insolvency or resolution or
similar proceedings relating to the Guarantor or the breach of a
covenant by the Guarantor or upon the Guarantor’s guarantee ceasing
to be in full force and effect.
Risks Related to the SPX
Our offering of the notes does not constitute a recommendation
of the SPX. You should not take our offering of the notes as an
expression of our views about how the SPX will perform in the
future. As we are part of a global financial institution, we, the
Guarantor and our other affiliates may, and often do, have
positions (both long and short) in the SPX that may conflict with
an investment in the notes. You should undertake an independent
determination of whether an investment in the notes is suitable for
you in light of your specific investment objectives, risk tolerance
and financial resources.
Our affiliates may publish research, express opinions or provide
recommendations that are inconsistent with investing in the notes
and any such research, opinions or recommendations could adversely
affect level of the SPX. In the ordinary course of business,
our affiliates may have published research reports, expressed
opinions or provided recommendations on the SPX or the equity
securities represented by the SPX, the applicable financial markets
or other matters that may influence the level of the SPX and the
value of the notes, and may do so in the future. These research
reports, opinions or recommendations may be communicated to our
clients and clients of our affiliates and may be inconsistent with
purchasing or holding the notes. Any research reports, opinions or
recommendations expressed by our affiliates may not be consistent
with each other and may be modified from time to time without
notice. Moreover, other professionals who deal in markets relating
to the SPX may at any time have significantly different views from
those of our affiliates. For these reasons, you are
PS-14
encouraged to derive information concerning the SPX or the
securities represented thereby from multiple sources, and you
should not rely on the views expressed by our affiliates.
The publisher of the SPX may adjust the SPX in a way that
affects its levels, and the publisher has no obligation to consider
your interests. We, the Guarantor and our affiliates, including
the Selling Agents, have no affiliation with the publisher of the
SPX (the “Index Publisher”). Consequently, we have no
control of the actions of the Index Publisher. The Index Publisher
can add, delete, or substitute the components included in the SPX
or make other methodological changes that could change its level. A
new security included in the SPX may perform significantly better
or worse than the replaced security, and the performance will
impact the level of the SPX. Additionally, the Index Publisher may
alter, discontinue, or suspend calculation or dissemination of the
SPX. Any of these actions could adversely affect the value of your
notes. The Index Publisher will have no obligation to consider your
interests in calculating or revising the SPX.
The business activities of us, the Guarantor and any of our
other affiliates, including the Selling Agents, relating to the
companies included in the SPX may create conflicts of interest with
you. We, the Guarantor and/or our other affiliates, including
the Selling Agents, at the time of this offering of the notes or in
the future, may engage in business with the companies included in
the SPX, including making loans to or equity investments in, or
providing investment banking, asset management, or other services
to, those companies, their affiliates and their competitors.
In connection with these activities, we, the Guarantor or our other
affiliates, including the Selling Agents, may receive information
about those companies that we or they will not divulge to you or
other third parties. One or more of our affiliates may have
published, and in the future may publish, research reports on one
or more of these companies. This research is modified from time to
time without notice and may express opinions or provide
recommendations that are inconsistent with purchasing or holding
the notes. Any of these activities may adversely affect the value
of the SPX and, consequently, the market value of your Notes. We,
the Guarantor and our other affiliates, including the Selling
Agents, do not make any representation to any purchasers of the
notes regarding any matters whatsoever relating to the issuers of
the securities represented by the SPX. Any prospective purchaser of
the notes should undertake an independent investigation of the
companies represented by the SPX to a level that, in its judgment,
is appropriate to make an informed decision regarding an investment
in the notes. The offering of the notes does not reflect any
investment recommendations from us, the Guarantor or our other
affiliates, including the Selling Agents.
We, the Guarantor and any of our other affiliates, including the
Selling Agents, do not control any company included in the SPX and
have not verified any disclosure made by any of those
companies. We, the Guarantor or our other affiliates, including
the Selling Agents, currently, or in the future, may engage in
business with the Index Publisher or companies represented by the
SPX, and we, the Guarantor or our other affiliates, including the
Selling Agents, may from time to time own securities of companies
represented by the SPX, unless (and only to the extent that) our
securities or the securities of the Guarantor or our other
affiliates are included in the SPX. However, none of us, the
Guarantor or any of our other affiliates, including the Selling
Agents, have the ability to control the actions of the Index
Publisher or any of these companies or have undertaken any
independent review of, or made any due diligence inquiry with
respect to the Index Publisher or any of these companies. In
addition, we, the Guarantor and any of our other affiliates,
including the Selling Agents, are not responsible for the
calculation of the SPX. You should make your own investigation into
the SPX.
None of the Index Publisher or their affiliates, or any companies
represented by the SPX, will be involved in any offering of the
Notes or will have any obligation of any sort with respect to the
notes. As a result, none of those companies will have any
obligation to take your interests as
PS-15
holders of the notes into consideration for any reason, including
taking any corporate actions that might adversely affect the value
of the securities included in the SPX or the value of the
notes.
We cannot assure you that publicly available information
provided about the SPX is accurate or complete. All disclosures
relating to the SPX are derived from publicly available documents
and other publicly available information, without independent
verification. None of us, the Guarantor, the Selling Agents or our
other affiliates has participated in, and will not participate in,
the preparation of those documents or make any due diligence
inquiry with respect to the SPX in connection with the offering of
the notes. We and the Guarantor do not make any representation that
those publicly available documents or any other publicly available
information regarding the SPX is accurate or complete. We and the
Guarantor are not responsible for the public disclosure of
information by or about the SPX, whether contained in filings with
the SEC or otherwise made publicly available. As a result we cannot
give any assurance that all events which could impact the SPX or
the accuracy or completeness of those public documents or
information have been publicly disclosed. Any subsequent disclosure
or future failure to disclose material events concerning the SPX
could affect its value and therefore, the value of the Notes. You
must rely on your own evaluation of the merits of an investment in
the note.
The historical performance of the SPX should not be taken as an
indication of its performance during the term of the notes. The
SPX may perform better or worse than it has historically during the
term of the notes. The historical performance of the SPX, including
the historical performance set forth herein, should not be taken as
an indication of the SPX’s future performance.
Valuation- and Market-related Risks
The public offering price you are paying for the notes exceeds
the initial estimated value. The initial estimated value of the
notes that is provided on the cover page of this pricing supplement
is an estimate only, determined as of the pricing date by reference
to our and our affiliates’ pricing models. These pricing models
consider certain assumptions and variables, including our credit
spreads and those of the Guarantor, the Guarantor’s internal
funding rate, mid-market terms on hedging transactions,
expectations on interest rates, volatility, price-sensitivity
analysis, and the expected term of the notes. These pricing models
rely in part on certain forecasts about future events, which may
prove to be incorrect.
The initial estimated value does not represent a minimum or maximum
price at which we, the Guarantor, BofA Securities, Inc. (“BofAS”)
or any of our other affiliates would be willing to purchase your
notes in any secondary market (if any exists) at any time. The
value of your notes at any time after the pricing date will vary
based on many factors that cannot be predicted with accuracy,
including our and the Guarantor’s creditworthiness and changes in
market conditions.
If you attempt to sell the notes prior to maturity, their market
value may be lower than the price you paid for them and lower than
their initial estimated value. This is due to, among other things,
changes in the levels of the SPX and the 2y SOFR Swap Rate, changes
in the Guarantor’s internal funding rate, and the inclusion in the
public offering price of the underwriting discount and the hedging
related charges, all as further described in “Structuring the
Notes” below. These factors, together with various credit, market
and economic factors over the term of the notes, are expected to
reduce the price at which you may be able to sell the notes in any
secondary market and will affect the value of the notes in complex
and unpredictable ways.
We cannot assure you that a trading market for your notes will
ever develop or be maintained. We will not list the notes on
any securities exchange. We cannot predict how the notes will trade
in any secondary market or whether that market will be liquid or
illiquid.
The development of a trading market for the notes will depend on
the Guarantor’s financial performance and other factors, including
changes in levels of the SPX and the 2y SOFR Swap
PS-16
Rate. The number of potential buyers of your notes in any secondary
market may be limited. We anticipate that the selling agent will
act as a market-maker for the notes, but none of us, the Guarantor
or the selling agent is required to do so. There is no assurance
that any party will be willing to purchase your notes at any price
in any secondary market. The selling agent may discontinue its
market-making activities as to the notes at any time. To the extent
that the selling agent engages in any market-making activities, it
may bid for or offer the notes. Any price at which the selling
agent may bid for, offer, purchase, or sell any notes may differ
from the values determined by pricing models that it may use,
whether as a result of dealer discounts, mark-ups, or other
transaction costs. These bids, offers, or completed transactions
may affect the prices, if any, at which the notes might otherwise
trade in the market.
In addition, if at any time the selling agent were to cease acting
as a market-maker as to the notes, it is likely that there would be
significantly less liquidity in the secondary market. In such a
case, the price at which the notes could be sold likely would be
lower than if an active market existed.
If you attempt to sell the notes prior to maturity, their market
value, if any, will be affected by various factors that interrelate
in complex ways, and their market value may be less than the
principal amount of the notes. Unlike savings accounts,
certificates of deposit, and other similar investment products, you
have no right to have your notes redeemed prior to maturity. If you
wish to liquidate your investment in the notes prior to maturity,
your only option would be to sell them. At that time, there may be
an illiquid market for your notes or no market at all. Even if you
were able to sell your notes, there are many factors outside of our
control that may affect their market value, some of which, but not
all, are stated below. Some of these factors are interrelated in
complex ways. As a result, the effect of any one factor may be
offset or magnified by the effect of another factor. These factors
may interact with each other in complex and unpredictable ways. The
following paragraphs describe the expected impact on the market
value of the notes from a change in a specific factor, assuming all
other conditions remain constant.
|
· |
The levels of the SPX and the
2y SOFR Swap Rate are expected to affect the market value of the
notes. We expect that the market value of the notes will depend
substantially on the levels of the SPX and the 2y SOFR Swap Rate,
and expectations regarding the SPX and the 2y SOFR Swap Rate in the
future. In general, the value of the notes will increase when
expectations as to the levels of the SPX and the 2y SOFR Swap Rate
increase, and the value of the notes will decrease when
expectations as to the future levels of the SPX and the 2y SOFR
Swap Rate decrease. If you sell your notes when the annual interest
payable on the notes is less than, or expected to be less than,
market interest rates (as compared to traditional interest-bearing
debt securities), you may receive less than the principal amount
that would be payable at maturity. |
|
· |
Changes in the levels of
interest rates may affect the market value of the notes. The
level of interest rates in the United States may affect the U.S.
economy and, in turn, the levels of the 2y SOFR Swap Rate. Changes
in prevailing interest rates may decrease the level of the 2y SOFR
Swap Rate, which would decrease the interest rate on the notes, if
payable. This, in turn, may decrease the market value of the
notes. |
|
· |
Potential volatility of the
SPX or the 2y SOFR Swap Rate. Volatility is the term used to
describe the size and frequency of market fluctuations. The 2y SOFR
Swap Rate may be subject to volatility due to a variety of factors
affecting interest rates generally, including, but not limited to:
sentiment regarding underlying strength in the U.S. and global
economies, expectations regarding the level of price inflation,
sentiment regarding credit quality in U.S. and global credit
markets, central bank policy regarding interest rates and the
performance of capital markets. Increases or decreases in the
volatility of the SPX or the 2y SOFR Swap Rate may have an adverse
impact on the market value of the notes. |
PS-17
|
· |
Economic and other conditions
generally. The general economic conditions of the capital
markets in the United States, as well as geopolitical conditions
and other financial, political, regulatory, and judicial events and
related uncertainties that affect stock markets generally, may
adversely affect the value of the SPX and the market value of the
notes. The level of the 2y SOFR Swap Rate may be adversely affected
by prevailing interest rates, which may be influenced by a number
of factors, including general economic conditions in the United
States, U.S. monetary and fiscal policies, inflation, supply and
demand for overnight U.S. Treasury repurchase agreements and other
financial, political, regulatory, and judicial events. These
factors interrelate in complex ways and may adversely affect the
interest payable on and the market value of your notes. |
|
· |
Our and the Guarantor’s
financial condition and creditworthiness. Our and the
Guarantor’s perceived creditworthiness, including any increases in
our respective credit spreads and any actual or anticipated
decreases in our respective credit ratings, may adversely affect
the market value of the notes. In general, we expect the longer the
amount of time that remains until maturity, the more significant
the impact will be on the value of the notes. However, a decrease
in our or the Guarantor’s credit spreads or an improvement in our
of the Guarantor’s credit ratings will not necessarily increase the
market value of the notes. |
|
· |
Time to maturity. There
may be a disparity between the market value of the notes prior to
maturity and their value at maturity. This disparity is often
called a time “value,” “premium,” or “discount,” and reflects
expectations concerning the levels of the SPX and the 2y SOFR Swap
Rate prior to the maturity date. As the time to maturity decreases,
this disparity will likely decrease, such that the value of the
notes will approach a value that reflects the remaining interest
payments on the notes based on the then-current levels of the SPX
and the 2y SOFR Swap Rate. |
Conflict-related Risks
Our trading and hedging activities, and those of the Guarantor
and any of our other affiliates, including BofAS, may create
conflicts of interest with you. We, the Guarantor or one or
more of our other affiliates, including the selling agent, may
engage in trading activities related to the 2y SOFR Swap Rate or
the SPX that are not for your account or on your behalf. These
entities also may issue or underwrite other financial instruments
with returns linked to the 2y SOFR Swap Rate or the SPX. These
trading and hedging activities may present a conflict of interest
between your interest in the notes and the interests we, the
Guarantor and our other affiliates, including the selling agent,
may have in our proprietary accounts, in facilitating transactions,
including block trades, for our or their other customers, and in
accounts under our or their management. These trading and other
business activities, if they influence the levels of the 2y SOFR
Swap Rate or the SPX or secondary trading in your notes, could be
adverse to your interests as a beneficial owner of the notes.
We, the Guarantor and one or more of our other affiliates,
including BofAS, expect to enter into arrangements or adjust or
close out existing transactions to hedge our obligations under the
notes. We, the Guarantor, or our other affiliates, including BofAS,
also may enter into hedging transactions relating to other notes or
instruments that we or they issue, some of which may have returns
calculated in a manner related to that of the notes offered hereby.
We may enter into such hedging arrangements with one or more of our
affiliates. Our affiliates may enter into additional hedging
transactions with other parties relating to the notes and the 2y
SOFR Swap Rate or the SPX. This hedging activity is expected to
result in a profit to those engaging in the hedging activity, which
could be more or less than initially expected, but could also
result in a loss. Each of these parties will price these hedging
transactions with the intent to realize a profit, regardless of
whether the value of the notes increases or decreases. Any profit
in connection with such hedging activities will be in addition to
any other compensation that we, the Guarantor, and
PS-18
our
other affiliates, including the selling agent, receive for the sale
of the notes, which creates an additional incentive to sell the
notes to you.
There may be potential conflicts of interest involving the
calculation agent, which is an affiliate of ours. We have the right
to appoint and remove the calculation agent. One of our
affiliates, MLCS, will be the calculation agent for the notes and,
as such, will determine the amount of interest to be paid on the
notes. Under some circumstances, these duties could result in a
conflict of interest between MLCS’s status as our affiliate and its
responsibilities as calculation agent.
For example, if a SOFR Swap Rate Transition Event and related SOFR
Swap Rate Replacement Date are determined to have occurred with
respect to the 2y SOFR Swap Rate, we or the calculation agent
(after consulting with us) will determine the SOFR Swap Rate
Replacement and the SOFR Swap Rate Replacement Adjustment and will
make SOFR Swap Rate Replacement Conforming Changes with respect to,
among other things, the determination of interest periods, the
timing and frequency of determining rates and making payments of
interest and other administrative matters, in connection with the
applicable SOFR Swap Rate Replacement as set forth in this pricing
supplement under set forth under “Description of the
Notes—Interest—Determination of U.S. Dollar SOFR ICE Swap
Rate®.” Certain determinations, decisions and elections
with respect to the SOFR Swap Rate Replacement will, or the
occurrence or non-occurrence of a SOFR Swap Rate Transition Event
and any SOFR Swap Rate Conforming Changes may, require the exercise
of discretion and the making of subjective judgments by us or the
calculation agent (after consulting with us). Any determination,
decision or election made by us or the calculation agent pursuant
to the applicable provisions set forth under “Description of the
Notes—Interest—Determination of U.S. Dollar SOFR ICE Swap
Rate®” will, if made by us, be made in our sole
discretion and, if made by the calculation agent, be made after
consultation with us and, in each case, will become effective
without consent from the holders of the notes or any other party.
In making these potentially subjective determinations, the Issuer
or its designee may have economic interests that are adverse to
your interests as holder of the notes, and none of us, the
Guarantor or any of our affiliates will have any obligation to
consider your interests as a holder of the notes in taking any
action or making any determination, which may adversely affect the
return on, value of and market for the notes.
For the reasons discussed above, we or the calculation agent may
exercise discretion with respect to significant aspects of the
terms and provisions of the notes (including with respect to
calculating interest payable on the notes).
PS-19
DESCRIPTION OF THE NOTES
General
The terms and provisions of the notes are set forth in this pricing
supplement and, as applicable, the accompanying prospectus
supplement and prospectus. The notes will be part of a series of
our medium-term notes entitled “Senior Medium-Term Notes, Series A”
issued under the senior indenture, as amended and supplemented from
time to time, among us, the Guarantor and The Bank of New York
Mellon Trust Company N.A., as trustee. The senior indenture is
described more fully in the accompanying prospectus supplement and
prospectus. The following description of the notes supplements the
description of the general terms and provisions of the notes and
debt securities set forth under the headings “Description of the
Notes” in the prospectus supplement and “Description of Debt
Securities” in the prospectus. These documents should be read in
connection with this pricing supplement.
The notes will rank equally in right of payment with all of our
other unsecured and unsubordinated obligations from time to time
outstanding and the guarantee of the notes will rank equally in
right of payment with all other unsecured and unsubordinated
obligations of the Guarantor, in each case except obligations that
are subject to any priorities or preferences by law. Any payments
due on the notes, including any repayment of principal, are subject
to our credit risk, as issuer, and the credit risk of BAC, as
guarantor.
The notes will be issued in minimum denominations of $1,000, and
whole multiples of $1,000. You may transfer the notes only in whole
multiples of $1,000. The notes will mature on July 6, 2027.
The notes are not repayable at our or your option. The notes are
not subject to any sinking fund.
If any scheduled interest payment date or the maturity date is not
a business day, no adjustment will be made to the length of the
corresponding quarterly interest period. The payment will be
postponed to the next business day, and no additional interest will
be payable as a result of such postponement.
The notes will be issued in book-entry form only.
Interest
Interest Payment Dates, Interest Periods, Interest Reset Dates
Each interest payment due for a quarterly interest period, if any,
will be paid on January 6, April 6, July 6 and October 6 of each
year, beginning on October 6, 2022, and ending on the maturity date
(such dates, the “interest payment dates”).
Each quarterly interest period (other than the first quarterly
interest period from, and including, the original date of issuance
of the notes to, but excluding, October 6, 2022) will commence on,
and will include, an interest payment date, and will extend to, but
will exclude, the next succeeding interest payment date or the
maturity date, as applicable.
A “business day” means any day other than a day on which banking
institutions in New York, New York are authorized or required by
law, regulation, or executive order to close or a day on which
transactions in U.S. dollars are not conducted.
The interest rate for each interest period will be reset on the
first day of that interest period, which we refer to as the
“interest reset date.” The “interest determination date” for
each
PS-20
such
interest period will be the second U.S. government securities
business day preceding the interest payment date for such interest
period. The calculation agent will determine the applicable
interest rate, if any, for each interest period on the interest
determination date. Once determined by the calculation agent, the
applicable interest rate for each quarterly interest period will
apply from and including the interest reset date, through, but
excluding, the next interest reset date (or the maturity date, as
applicable). Interest for each interest period will be determined
in arrears at the end of each interest period.
Determination of Interest by the Calculation Agent
Interest is computed on the basis of a 360-day year of twelve
30-day months.
For each quarterly interest period, interest will accrue quarterly
at a rate per annum equal to 2y SOFR Swap Rate + 1.00% if the
Observation Value of the SPX on the applicable interest
determination date is greater than or equal to the Threshold Value.
If the Observation Value of the SPX on the applicable interest
determination date is less than the Threshold Value, no interest
will be payable or accrue with respect to the applicable interest
period. The calculation agent will determine the applicable
interest rate, if any, for each interest period.
The “Starting Value” of the SPX is the closing level of the SPX on
the pricing date and is set forth on page PS-5 above.
The “Observation Value” of the SPX will be the closing level of the
SPX on the applicable interest determination date, subject to
postponement in the event of a Market Disruption Event or
non-Trading Day.
The “Threshold Value” is equal 50% of the Starting Value and is set
forth on page PS-5 above.
“2y SOFR Swap Rate” means the U.S. Dollar SOFR ICE Swap
Rate® for a tenor of 2 years as of the applicable
interest determination date.
Determination of U.S. Dollar SOFR ICE Swap
Rate®
In respect of each interest determination date, the “U.S. Dollar
SOFR ICE Swap Rate®” for the applicable tenor will be
such rate as calculated and provided as of approximately 11:00
a.m., New York City time (or any amended time specified by the
administrator of the U.S. dollar SOFR ICE Swap Rate® in
the benchmark methodology) on such interest determination date by
IBA as the administrator of the benchmark (or a successor
administrator), as such rate appears for the indices “USISSO02
Index” on the Designated SOFR Swap Rate Page at approximately 12:15
p.m., New York City time, on such interest determination date, as
determined by the calculation agent.
If the 2y SOFR Swap Rate cannot be determined in accordance with
the preceding paragraph on any interest determination date, and a
SOFR Swap Rate Transition Event and related SOFR Swap Rate
Replacement Date have not occurred, then the 2y SOFR Swap Rate for
such interest determination date will be determined by the
calculation agent in its sole discretion, after consulting such
sources as it deems comparable to the Designated SOFR Swap Rate
Page or to the sources from which the administrator of such rate
obtains the swap rate input data used by the administrator to
calculate such rate, or any other source or data it determines to
be reasonable (including, if applicable, the 2y SOFR Swap Rate that
was most recently published by the administrator of such rate) for
the purpose of estimating such rate.
Notwithstanding the foregoing paragraph, if we or the calculation
agent (after consulting with us) determines that a SOFR Swap Rate
Transition Event and related SOFR Swap Rate Replacement Date have
occurred prior to the applicable SOFR Swap Rate Reference Time in
respect of any determination of the 2y SOFR Swap Rate on any date,
the applicable SOFR Swap Rate Replacement will replace the 2y SOFR
Swap Rate for all purposes relating to the notes in respect of such
determination on such date and all determinations on all subsequent
dates unless
PS-21
and
until another SOFR Swap Rate Transition Event and related SOFR Swap
Rate Replacement Date have occurred with respect to the applicable
SOFR Swap Rate Replacement. In the event that a SOFR Swap Rate
Transition Event and related SOFR Swap Rate Replacement Date have
occurred with respect to the 2y SOFR Swap Rate and we or the
calculation agent (after consulting with us) have selected a SOFR
Swap Rate Replacement, the provisions set forth in this paragraph
shall apply to any such SOFR Swap Rate Replacement and references
herein to the 2y SOFR Swap Rate shall mean such SOFR Swap Rate
Replacement. In connection with the implementation of a SOFR Swap
Rate Replacement, we or the calculation agent (after consulting
with us) will have the right to make SOFR Swap Rate Replacement
Conforming Changes from time to time. If we or the calculation
agent (after consulting with us) determines that there is no such
replacement rate as of any date of determination, then we or the
calculation agent (after consulting with us) will determine a
substitute rate or substitute rate value to be used in place of the
2y SOFR Swap Rate for that date of determination, after consulting
such sources as we or it deems comparable to the Designated SOFR
Swap Rate Page or to the sources from which the administrator of
such rate obtains the swap rate input data used by the
administrator to calculate such rate, or any other source or data
it determines to be reasonable (including, if applicable, the 2y
SOFR Swap Rate that was most recently published by the
administrator of such rate) for the purpose of determining such
substitute rate or substitute rate value.
As used in the foregoing terms and provisions relating to the
determination of the U.S. Dollar SOFR ICE Swap Rate:
“Designated SOFR Swap Rate Page” means the page entitled “USD SOFR
(11:15am NY)” that can be accessed on the Bloomberg Professional
Services service (or any other page or screen that replaces that
page or screen on the Bloomberg Professional Services service or
such other service or services as may be nominated for the purpose
of displaying rates for U.S. dollar swaps referencing SOFR by IBA
or its successor or such other entity assuming the responsibility
of IBA or its successor in calculating rates for U.S. dollar swaps
referencing SOFR in the event IBA or its successor no longer does
so).
“SOFR Swap Rate Replacement” means the sum of (a) the alternate
rate of interest that has been selected by us or the calculation
agent (after consulting with us) as an industry-accepted
replacement for the 2y SOFR Swap Rate for U.S. dollar-denominated
floating-rate notes at such time and (b) the SOFR Swap Rate
Replacement Adjustment.
“SOFR Swap Rate Replacement Adjustment” means the spread adjustment
(which may be a positive or negative value or zero) that has been
selected by us or the calculation agent (after consulting with us)
giving due consideration to any industry-accepted spread
adjustment, or method for calculating or determining such spread
adjustment, for the replacement of the 2y SOFR Swap Rate with the
applicable Unadjusted SOFR Swap Rate Replacement for U.S.
dollar-denominated floating-rate notes at such time.
“SOFR Swap Rate Replacement Conforming Changes” means, with respect
to any SOFR Swap Rate Replacement, changes to (1) any interest
determination date, interest payment date, interest reset date,
business day convention or interest period, (2) the manner, timing
and frequency of determining rates and amounts of interest that are
payable on the relevant notes and the conventions relating to such
determination, (3) the timing and frequency of making payments of
interest, (4) rounding conventions, (5) tenors, and (6) any other
terms or provisions of the notes, in each case that we or the
calculation agent (after consulting with us) determines, from time
to time, to be appropriate to reflect the determination and
implementation of such SOFR Swap Rate Replacement giving due
consideration to any industry-accepted market practice.
“SOFR Swap Rate Replacement Date” means the earliest to occur of
the following events with respect to the 2y SOFR Swap Rate:
PS-22
(1) in the case of clause (1) or (2) of the definition of “SOFR
Swap Rate Transition Event,” the later of (a) the date of the
public statement or publication of information referenced therein
and (b) the date on which the administrator of such rate, as
applicable, permanently or indefinitely ceases to provide such
rate; or
(2) in the case of clause (3) of the definition of “SOFR Swap Rate
Transition Event,” if such statement or publication referenced
therein indicates that the administrator or regulatory supervisor
for the administrator has determined that such rate is no longer
representative: (a) at the date of such statement or publication
referenced therein, the date of such statement or publication; or
(b) as of a specified future date, the first date on which such
rate would ordinarily have been published or provided and is
non-representative by reference to the most recent statement or
publication referenced therein, even if such rate continues to be
published or provided on such date; or
(3) in the case of clause (4) or (5) of the definition of “SOFR
Swap Rate Transition Event,” the date of such determination.
For the avoidance of doubt, if the event giving rise to the SOFR
Swap Rate Replacement Date occurs on the same day as, but earlier
than, the SOFR Swap Rate Reference Time in respect of any
determination, the SOFR Swap Rate Replacement Date will be deemed
to have occurred prior to the SOFR Swap Rate Reference Time for
such determination.
“SOFR Swap Rate Transition Event” means the occurrence of one or
more of the following events with respect to the 2y SOFR Swap
Rate:
(1) a public statement or publication of information by or on
behalf of the administrator of such rate announcing that such
administrator has ceased or will cease to provide such rate,
permanently or indefinitely, provided that, at the time of such
statement or publication, there is no successor administrator that
will continue to provide such rate;
(2) a public statement or publication of information by the
regulatory supervisor for the administrator of such rate, the
central bank for the currency of such rate, an insolvency official
with jurisdiction over the administrator for such rate, a
resolution authority with jurisdiction over the administrator for
the such rate or a court or an entity with similar insolvency or
resolution authority over the administrator for such rate, which
states that the administrator of such rate has ceased or will cease
to provide such rate permanently or indefinitely, provided that, at
the time of such statement or publication, there is no successor
administrator that will continue to provide such rate;
(3) a public statement or publication of information by the
administrator of such rate or the regulatory supervisor for the
administrator of such rate announcing that such rate is no longer,
or as of a specified future date will no longer be, representative
of the underlying market and economic reality that such rate is
intended to measure and that representativeness will not be
restored; or
(4) a determination by us or the calculation agent (after
consulting with us) that such rate has been permanently or
indefinitely discontinued; or
(5) a determination by us or the calculation agent (after
consulting with us) that (i) such rate as published is no longer an
industry-accepted rate of interest for U.S. dollar-denominated
floating-rate notes at such time or (ii) such rate as published is
no longer an industry-accepted rate of interest in the derivatives
market for hedging transactions related to U.S. dollar-denominated
floating-rate notes.
“SOFR Swap Rate Reference Time” with respect to any determination
of the 2y SOFR Swap Rate means approximately 12:15 p.m., New York
City time, on the applicable interest
PS-23
determination date; provided that if a SOFR Swap Rate Transition
Event and related SOFR Swap Rate Replacement Date have occurred and
we or the calculation agent (after consulting with us) has selected
a SOFR Swap Rate Replacement, “SOFR Swap Rate Reference Time” will
mean the time determined by us or the calculation agent (after
consulting with us) in accordance with the SOFR Swap Rate
Replacement Conforming Changes.
“Unadjusted SOFR Swap Rate Replacement” means the SOFR Swap Rate
Replacement excluding the SOFR Swap Rate Replacement
Adjustment.
Payment at Maturity
On the maturity date, you will be paid the principal amount of the
notes and any accrued and unpaid interest on the notes, subject to
our and the Guarantor’s credit risk. See “Risk
Factors—Structure-related Risks—All payments on the notes are
subject to our credit risk and the credit risk of the Guarantor,
and actual or perceived changes in our or the Guarantor’s
creditworthiness are expected to affect the value of the notes”
above.
Regardless of the amounts of the interest payable, if any, during
each interest period over the term of the notes, you will receive
your principal amount at maturity, assuming that we are otherwise
able to pay our debts on the maturity date.
Additional Terms with Respect to the SPX
A “Trading Day” means a day on which (1) the applicable
exchange(s), or their successors, are open for trading and
(2) the SPX or any successor index is calculated and
published.
Events Relating to the Pricing Date. If, as to the SPX, (i)
a Market Disruption Event occurs on the pricing date or (ii) the
pricing date is determined by the calculation agent not to be a
Trading Day by reason of an extraordinary event, occurrence,
declaration or otherwise, the closing level of the SPX for the
pricing date will be its closing level on the first Trading Day
following the pricing date on which no Market Disruption Event
occurs with respect to the SPX; provided that the closing level
will be determined (or, if not determinable, estimated) by the
calculation agent in a manner which the calculation agent considers
commercially reasonable under the circumstances on a date no later
than the second scheduled Trading Day following the pricing date,
regardless of the occurrence of a Market Disruption Event or
non-Trading Day on that day.
Events Relating to Interest Determination Dates. If, as to
the SPX, (i) a Market Disruption Event occurs on a scheduled
interest determination date or (ii) the calculation agent
determines that, by reason of an extraordinary event, occurrence,
declaration or otherwise, any scheduled interest determination date
is not a Trading Day for the SPX, the closing level of the SPX for
such interest determination date will be deemed to be its closing
level on the first Trading Day preceding such interest
determination date on which no Market Disruption Event occurs with
respect to the SPX.
Market Disruption Events. A “Market Disruption Event” means
one or more of the following events, as determined by the
calculation agent in its sole discretion:
|
|
(A) |
the suspension of or material
limitation on trading, in each case, for more than two consecutive
hours of trading, or during the one-half hour period preceding the
close of trading, on the primary exchange where the securities
included in the SPX trade, as determined by the calculation agent
(without taking into account any extended or after-hours trading
session), in 20% or more of the securities which then comprise the
SPX or any Successor Index (as defined in “—Discontinuance of the
SPX” below); or |
|
|
(B)
|
the suspension of or material
limitation on trading, in each case, for more than two consecutive
hours of trading, or during the one-half hour period preceding the
close |
PS-24
|
|
|
of trading, on the primary exchange
that trades options contracts or futures contracts related to the
SPX, as determined by the calculation agent (without taking into
account any extended or after-hours trading session), in options
contracts or futures contracts related to the SPX, or any Successor
Index, whether by reason of movements in price otherwise exceeding
levels permitted by the relevant exchange or otherwise. |
For the purpose of determining whether a Market Disruption Event as
to the SPX has occurred:
|
|
(1) |
a limitation on the hours in a
Trading Day and/or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in
the regular business hours of the relevant exchange; |
|
|
(2) |
a decision to permanently discontinue
trading in the relevant futures or options contracts related to the
SPX, or any Successor Index, will not constitute a Market
Disruption Event; |
|
|
(3) |
a suspension in trading in a futures
or options contract on the SPX, or any Successor Index, by a major
securities market by reason of (a) a price change violating
limits set by that securities market, (b) an imbalance of
orders relating to those contracts, or (c) a disparity in bid
and ask quotes relating to those contracts will constitute a
suspension of or material limitation on trading in futures or
options contracts related to the SPX or any Successor
Index; |
|
|
(4) |
a suspension of or material
limitation on trading on the relevant exchange will not include any
time when that exchange is closed for trading under ordinary
circumstances; and |
| |
(5) |
if applicable to Indices with
component securities listed on the NYSE, for the purpose of clause
(A) above, any limitations on trading during significant
market fluctuations under NYSE Rule 80B, or any applicable rule or
regulation enacted or promulgated by the NYSE or any other
self-regulatory organization or the SEC of similar scope as
determined by the calculation agent, will be considered
“material.” |
Adjustments to the SPX. After the pricing date, the Index
Publisher of the SPX may make a material change in the method of
calculating the SPX or in another way that changes the SPX such
that it does not, in the opinion of the calculation agent, fairly
represent the level of the SPX had those changes or modifications
not been made. In this case, the calculation agent will, at the
close of business in New York, New York, on each date that the
closing level is to be calculated under the terms of the notes,
make adjustments to the SPX. Those adjustments will be made in good
faith as necessary to arrive at a calculation of a level of the SPX
as if those changes or modifications had not been made, and
calculate the closing level of the SPX, as so adjusted.
Discontinuance of the SPX. After the pricing date, the Index
Publisher may discontinue publication of the SPX. The Index
Publisher or another entity may then publish a substitute index
that the calculation agent determines, in its sole discretion, to
be comparable to the SPX (a “Successor Index”). If this occurs, the
calculation agent will substitute the Successor Index as calculated
by the relevant index publisher or any other entity and calculate
the level of the SPX at any time required under the terms of the
notes. If the calculation agent selects a Successor Index, the
calculation agent will give written notice of the selection to the
trustee, to us, to the Guarantor, and to the holders of the
Notes.
If the Index Publisher discontinues publication of the SPX before
the last date on which the level of the SPX must be determined for
purposes of the notes, and the calculation agent does
PS-25
not
select a Successor Index, then on each relevant day that the level
of the SPX must be determined, until the earlier to occur of:
|
|
• |
|
the determination of the final
payment on the notes; and |
| |
• |
|
a determination by the calculation
agent that a Successor Index is available, |
the calculation agent will compute a substitute level for the SPX
in accordance with the procedures last used to calculate the SPX
before any discontinuance. The calculation agent will make
available to holders of the notes information regarding those
levels by means of Bloomberg L.P., Thomson Reuters, a website, or
any other means selected by the calculation agent in its reasonable
discretion.
If a Successor Index is selected or the calculation agent
calculates a level as a substitute for the SPX, the Successor Index
or level will be used as a substitute for all purposes, including
for the purpose of determining whether a Market Disruption Event
exists.
Notwithstanding these alternative arrangements, any modification or
discontinuance of the publication of the SPX may adversely affect
trading in the notes.
Role of the Calculation Agent
The calculation agent has the sole discretion to make all
determinations regarding the notes, including determinations
regarding the SPX, any Market Disruption Events, a Successor Index,
Trading Days, determinations relating to changes to the SPX, the 2y
SOFR Swap Rate, the amount of each interest payment, if any, U.S.
Government Securities Business Days, and business days. Absent
manifest error, all determinations of the calculation agent will be
final and binding on you and us, without any liability on the part
of the calculation agent.
We have initially appointed our affiliate, MLCS, as the calculation
agent, but we may change the calculation agent at any time without
notifying you.
Same-Day Settlement and Payment
The notes will be delivered in book-entry form only through DTC
against payment by purchasers of the notes in immediately available
funds. We will make payments of the principal amount and each
interest payment in immediately available funds so long as the
notes are maintained in book-entry form.
Events of Default and Rights of Acceleration
If an Event of Default, as defined in the senior indenture and in
the section entitled “Description of Debt Securities—Events of
Default and Rights of Acceleration” beginning on page 22 of the
accompanying prospectus, with respect to the notes occurs and is
continuing, the amount payable to a holder of the notes upon any
acceleration permitted under the senior indenture will be equal to
the principal amount plus any accrued and unpaid interest,
calculated as though the date of acceleration were the Maturity
Date of the notes and as though the final interest determination
date were the second U.S. Government Securities Business Days prior
to the date of acceleration. In case of a default in the payment of
the notes, whether at their maturity or upon acceleration, the
notes will not bear a default interest rate.
Listing
The notes will not be listed on any securities exchange.
PS-26
Information About U.S. Dollar SOFR ICE Swap Rate® and
its methodology
General
The U.S. Dollar SOFR ICE Swap Rate® was launched by IBA
for use as a benchmark on November 8, 2021 in order to aid the
market’s transition to SOFR and away from U.S. dollar LIBOR. IBA is
the administrator of the U.S. Dollar SOFR ICE Swap Rate®
and has overall responsibility for all aspects of the U.S. Dollar
SOFR ICE Swap Rate® determination process, including the
development, determination, dissemination, operation and governance
of the various U.S. Dollar SOFR ICE Swap Rate® tenors.
IBA has published the ICE Swap Rate® Methodology and
certain other applicable policies which together set out IBA’s
method for determining and publishing, rules and criteria relating
to, and certain other information applicable to the U.S. Dollar
SOFR ICE Swap Rate®. Information in the ICE Swap
Rate® Methodology and IBA’s other applicable policies
reflect the policies of, and are subject to change by, IBA. IBA
licenses the U.S. Dollar SOFR ICE Swap Rate® to users
for, among other purposes, use as a reference rate. The U.S. Dollar
SOFR ICE Swap Rate® is calculated on each weekday other
than those set forth in IBA’s ICE Swap Rate Holiday Calendar, which
is available on the ICE Swap Rate® Website, and
published in the ICE Report Center, a link to which is available on
the ICE Swap Rate® Website. For any particular day, the
only rate available for viewing on the ICE Report Center is the
rate published for the preceding publication day.
Pursuant to the ICE Swap Rate® Methodology, the U.S.
Dollar SOFR ICE Swap Rate® is calculated using eligible
prices and volumes for U.S. dollar swaps referencing a compounded
average of daily SOFR compounded in arrears for twelve months using
standard market conventions, calculated on the basis of the actual
number of days elapsed, with a year presumed to comprise 360 days).
Input data for calculation of the U.S. Dollar SOFR ICE Swap
Rate® consists of executable prices and volumes provided
by regulated, electronic, trading venues and, if such trading
venues do not provide sufficient eligible input data, dealer to
client prices and volumes displayed electronically by trading
venues. If there is insufficient eligible input data to calculate a
rate in accordance with the foregoing, IBA uses movement
interpolation, where possible for applicable tenors, to calculate a
rate. Where it is not possible to calculate an U.S. Dollar SOFR ICE
Swap Rate® for an applicable tenor in accordance with
the foregoing, then IBA’s Insufficient Data Policy will apply and
“No Publication” will be published for the U.S. Dollar SOFR ICE
Swap Rate® of the applicable tenor. The U.S. Dollar SOFR
ICE Swap Rate® for the various applicable tenors as
reported on the ICE Report Center and the Designated SOFR Swap Rate
Page is expressed as an integer; however, for purpose of
calculations of interest with respect to the notes, such rate will
be deemed to be expressed as a percentage (for example, if the U.S.
Dollar SOFR ICE Swap Rate® is reported on the ICE Report
Center and the Designated SOFR Swap Rate Page as 1.24, such rate
for purposes of calculations of interest with respect to the notes
will be deemed to be 1.24%).
IBA states that: (i) historical U.S. Dollar SOFR ICE Swap
Rate® and other information may not be indicative of
future information or performance, (ii) none of IBA,
Intercontinental Exchange, Inc. (“ICE”) or any third party that
provides data used to administer or determine the U.S. Dollar SOFR
ICE Swap Rate® and other information (“Data Provider”),
or any of its or their affiliates, makes any claim, prediction,
warranty or representation whatsoever, expressly or impliedly, as
to the timeliness, accuracy or completeness of the U.S. Dollar SOFR
ICE Swap Rate® or other information, the results to be
obtained from the use of the U.S. Dollar SOFR ICE Swap
Rate® or other information, or as to the appropriateness
or suitability of any the U.S. Dollar SOFR ICE Swap
Rate® or other information for any particular purpose to
which it might be put, (iii) to the fullest extent permitted by
applicable law, none of IBA, ICE or any Data Provider, or any of
its or their affiliates will be liable in respect of any
inaccuracies, errors, omissions, delays, failures, cessations or
changes (material or otherwise) in IBA’s U.S. Dollar SOFR ICE Swap
Rate® and other information, or for any damage, expense
or other loss (whether direct or indirect) you may suffer arising
out of or in connection with IBA’s U.S. Dollar SOFR ICE Swap
Rate® and other information or any reliance you may
place upon it and (iv) all implied terms, conditions and
PS-27
warranties, including without limitation as to quality,
merchantability, fitness for purpose, title or non-infringement, in
relation to IBA’s U.S. Dollar SOFR ICE Swap Rate® and
other information are hereby excluded to the fullest extent
permitted by applicable law.
Neither the ICE Swap Rate® Website, other pages to which
the ICE Swap Rate® Website may contain hyperlinks, nor
any of the information or materials available thereon, are
incorporated by reference into this pricing supplement. Use of the
U.S. Dollar SOFR ICE Swap Rate® is subject to important
disclaimers set forth in IBA’s Benchmark and Other Information
Notice and Disclaimer, available on the ICE Swap Rate®
Website and in the ICE Swap Rate® Methodology.
We, BAC, the selling agent and IBA are not affiliated with the New
York Fed. The New York Fed does not sanction, endorse, or recommend
any products or services offered by us or IBA.
Historical Levels of 2Y SOFR Swap Rate
The following graph sets forth the historical performance of the 2Y
SOFR Swap Rate from November 8, 2021 (the date the U.S. Dollar SOFR
ICE Swap Rate® was launched by IBA for use as a
benchmark) through June 27, 2022. This data is not intended to be
indicative of the future performance of the 2Y SOFR Swap Rate or
what the value of or return on the notes may be. Any historical
upward or downward trend in the 2Y SOFR Swap Rate during any period
set forth below is not an indication that the 2Y SOFR Swap Rate is
more or less likely to increase or decrease in value at any time
over the term of the notes or that these represent what the 2Y SOFR
Swap Rate would have been on any hypothetical interest
determination date. The graph below uses the 2Y SOFR Swap Rate as
quoted on the Bloomberg Professional Services service on page “USD
SOFR (11:15am NY)” for the indices “USISSO02 Index” (in the case of
the 2y SOFR Swap Rate) at 12:15 p.m., New York City time, on the
applicable date.
No one can predict what 2Y SOFR Swap Rate will be on any day
throughout the life of the notes or what 2Y SOFR Swap Rate will be
on any interest determination date. 2Y SOFR Swap Rate is the new
benchmark that was launched by IBA on November 8, 2021. The future
performance of 2Y SOFR Swap Rate and, by extension, the amount
payable on and market value for the notes, cannot be predicted
based on the limited historical information available. The amount
payable on and market value for the notes may be lower and more
volatile than a comparable investment where interest payments are
determined by reference to a benchmark with more fulsome historical
information.
PS-28
INFORMATION ABOUT THE SPX
All disclosures contained in this pricing supplement regarding the
SPX, including, without limitation, its make-up, method of
calculation, and changes in its components, have been derived from
publicly available sources. The information reflects the policies
of, and is subject to change by, S&P Dow Jones Indices LLC
(“SPDJI”), the sponsor of the SPX (the “Underlying Sponsor”). The
Underlying Sponsor, which licenses the copyright and all other
rights to the SPX, has no obligation to continue to publish, and
may discontinue publication of, the SPX. The consequences of the
Underlying Sponsor discontinuing publication of the SPX are
discussed in “Description of the Notes —Additional Terms with
Respect to the SPX—Discontinuance of the SPX” above. None of us,
the Guarantor, the calculation agent, or BofAS accepts any
responsibility for the calculation, maintenance or publication of
the SPX or any Successor Index. None of us, the Guarantor, BofAS or
any of our other affiliates makes any representation to you as to
the future performance of the SPX. You should make your own
investigation into the SPX.
The SPX includes a representative sample of 500 companies in
leading industries of the U.S. economy. The SPX is intended to
provide an indication of the pattern of common stock price
movement. The calculation of the level of the SPX is based on the
relative value of the aggregate market value of the common stocks
of 500 companies as of a particular time compared to the aggregate
average market value of the common stocks of 500 similar companies
during the base period of the years 1941 through 1943.
The SPX includes companies from eleven main groups: Communication
Services; Consumer Discretionary; Consumer Staples; Energy;
Financials; Health Care; Industrials; Information Technology; Real
Estate; Materials; and Utilities. SPDJI, the sponsor of the SPX,
may from time to time, in its sole discretion, add companies to, or
delete companies from, the SPX to achieve the objectives stated
above.
Company additions to the SPX must have an unadjusted company market
capitalization of $8.2 billion or more (an increase from the
previous requirement of an unadjusted company market capitalization
of $6.1 billion or more).
SPDJI calculates the SPX by reference to the prices of the
constituent stocks of the SPX without taking account of the value
of dividends paid on those stocks. As a result, the return on the
Notes will not reflect the return you would realize if you actually
owned the SPX constituent stocks and received the dividends paid on
those stocks.
Computation of the SPX
While SPDJI currently employs the following methodology to
calculate the SPX, no assurance can be given that SPDJI will not
modify or change this methodology in a manner that may affect
payments on the Notes.
Historically, the market value of any component stock of the SPX
was calculated as the product of the market price per share and the
number of then outstanding shares of such component stock. In March
2005, SPDJI began shifting the SPX halfway from a market
capitalization weighted formula to a float-adjusted formula, before
moving the SPX to full float adjustment on September 16, 2005.
SPDJI’s criteria for selecting stocks for the SPX did not change
with the shift to float adjustment. However, the adjustment affects
each company’s weight in the SPX.
Under float adjustment, the share counts used in calculating the
SPX reflect only those shares that are available to investors, not
all of a company’s outstanding shares. Float adjustment excludes
shares that are closely held by control groups, other publicly
traded companies or government agencies.
In September 2012, all shareholdings representing more than 5% of a
stock’s outstanding shares, other than holdings by “block owners,”
were removed from the float for purposes of calculating the SPX.
Generally, these “control holders” will include officers and
directors, private
PS-29
equity, venture capital and special equity firms, other publicly
traded companies that hold shares for control, strategic partners,
holders of restricted shares, ESOPs, employee and family trusts,
foundations associated with the company, holders of unlisted share
classes of stock, government entities at all levels (other than
government retirement/pension funds) and any individual person who
controls a 5% or greater stake in a company as reported in
regulatory filings. However, holdings by block owners, such as
depositary banks, pension funds, mutual funds and ETF providers,
401(k) plans of the company, government retirement/pension funds,
investment funds of insurance companies, asset managers and
investment funds, independent foundations and savings and
investment plans, will ordinarily be considered part of the
float.
Treasury stock, stock options, restricted shares, equity
participation units, warrants, preferred stock, convertible stock,
and rights are not part of the float. Shares held in a trust to
allow investors in countries outside the country of domicile, such
as depositary shares and Canadian exchangeable shares, are normally
part of the float unless those shares form a control block. If a
company has multiple classes of stock outstanding, shares in an
unlisted or non-traded class are treated as a control block.
For each stock, an investable weight factor (“IWF”) is calculated
by dividing the available float shares by the total shares
outstanding. Available float shares are defined as the total shares
outstanding less shares held by control holders. This calculation
is subject to a 5% minimum threshold for control blocks. For
example, if a company’s officers and directors hold 3% of the
company’s shares, and no other control group holds 5% of the
company’s shares, SPDJI would assign that company an IWF of 1.00,
as no control group meets the 5% threshold. However, if a company’s
officers and directors hold 3% of the company’s shares and another
control group holds 20% of the company’s shares, SPDJI would assign
an IWF of 0.77, reflecting the fact that 23% of the company’s
outstanding shares are considered to be held for control. As of
July 31, 2017, companies with multiple share class lines are no
longer eligible for inclusion in the SPX. Constituents of the SPX
prior to July 31, 2017 with multiple share class lines will be
grandfathered in and continue to be included in the SPX. If a
constituent company of the SPX reorganizes into a multiple share
class line structure, that company will remain in the SPX at the
discretion of the S&P Index Committee in order to minimize
turnover.
The SPX is calculated using a base-weighted aggregate methodology.
The level of the SPX reflects the total market value of all
component stocks relative to the base period of the years 1941
through 1943. An indexed number is used to represent the results of
this calculation in order to make the level easier to work with and
track over time. The actual total market value of the component
stocks during the base period of the years 1941 through 1943 has
been set to an indexed level of 10. This is often indicated by the
notation 1941- 43 = 10. In practice, the daily calculation of the
SPX is computed by dividing the total market value of the component
stocks by the “index divisor.” By itself, the index divisor is an
arbitrary number. However, in the context of the calculation of the
SPX, it serves as a link to the original base period level of the
SPX. The index divisor keeps the SPX comparable over time and is
the manipulation point for all adjustments to the SPX, which is
index maintenance.
Index Maintenance
Index maintenance includes monitoring and completing the
adjustments for company additions and deletions, share changes,
stock splits, stock dividends, and stock price adjustments due to
company restructuring or spinoffs. Some corporate actions, such as
stock splits and stock dividends, require changes in the common
shares outstanding and the stock prices of the companies in the
SPX, and do not require index divisor adjustments.
To prevent the level of the SPX from changing due to corporate
actions, corporate actions which affect the total market value of
the SPX require an index divisor adjustment. By adjusting the index
divisor for the change in market value, the level of the SPX
remains constant and does not reflect the corporate actions of
individual companies in the SPX. Index divisor adjustments are made
after the close of trading and after the calculation of the SPX
closing level.
Changes in a company’s shares outstanding of 5.00% or more due to
mergers, acquisitions, public offerings, tender offers, Dutch
auctions, or exchange offers are made as soon
PS-30
as reasonably possible. Share changes due to mergers or
acquisitions of publicly held companies that trade on a major
exchange are implemented when the transaction occurs, even if both
of the companies are not in the same headline index, and regardless
of the size of the change. All other changes of 5.00% or more (due
to, for example, company stock repurchases, private placements,
redemptions, exercise of options, warrants, conversion of preferred
stock, notes, debt, equity participation units, at-the-market
offerings, or other recapitalizations) are made weekly and are
announced on Fridays for implementation after the close of trading
on the following Friday. Changes of less than 5.00% are accumulated
and made quarterly on the third Friday of March, June, September,
and December, and are usually announced two to five days prior.
If a change in a company’s shares outstanding of 5.00% or more
causes a company’s IWF to change by five percentage points or more,
the IWF is updated at the same time as the share change. IWF
changes resulting from partial tender offers are considered on a
case by case basis.
Historical Performance of the SPX
The following graph sets forth the daily historical performance of
the SPX in the period from January 3, 2017 through the pricing
date. We obtained this historical data from Bloomberg L.P. We have
not independently verified the accuracy or completeness of the
information obtained from Bloomberg L.P.
This historical data on the SPX is not necessarily indicative of
the future performance of the SPX or what the value of the Notes
may be. Any historical upward or downward trend in the closing
level of the SPX during any period set forth above is not an
indication that the closing level of the SPX is more or less likely
to increase or decrease at any time over the term of the Notes.
Before investing in the Notes, you should consult publicly
available sources for the closing levels of the SPX.
PS-31
License Agreement
S&P® is a
registered trademark of Standard & Poor’s Financial Services
LLC (“S&P”) and Dow Jones® is a registered trademark
of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks
have been licensed for use by S&P Dow Jones Indices LLC.
“Standard & Poor’s®,” “S&P
500®” and
“S&P®” are
trademarks of S&P. These trademarks have been sublicensed for
certain purposes by our affiliate, Merrill Lynch, Pierce, Fenner
& Smith Incorporated. The SPX is a product of S&P Dow Jones
Indices LLC and/or its affiliates and has been licensed for use by
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Notes are not sponsored, endorsed, sold or promoted by S&P
Dow Jones Indices LLC, Dow Jones, S&P or any of their
respective affiliates (collectively, “S&P Dow Jones Indices”).
S&P Dow Jones Indices make no representation or warranty,
express or implied, to the holders of the Notes or any member of
the public regarding the advisability of investing in securities
generally or in the Notes particularly or the ability of the SPX to
track general market performance. S&P Dow Jones Indices’ only
relationship to Merrill Lynch, Pierce, Fenner & Smith
Incorporated with respect to the SPX is the licensing of the SPX
and certain trademarks, service marks and/or trade names of S&P
Dow Jones Indices and/or its third party licensors. The SPX is
determined, composed and calculated by S&P Dow Jones Indices
without regard to us, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, or the Notes. S&P Dow Jones Indices have no
obligation to take our needs, BAC’s needs or the needs of Merrill
Lynch, Pierce, Fenner & Smith Incorporated or holders of the
Notes into consideration in determining, composing or calculating
the SPX. S&P Dow Jones Indices are not responsible for and have
not participated in the determination of the prices and amount of
the Notes or the timing of the issuance or sale of the Notes or in
the determination or calculation of the equation by which the Notes
are to be converted into cash. S&P Dow Jones Indices have no
obligation or liability in connection with the administration,
marketing or trading of the Notes. There is no assurance that
investment products based on the SPX will accurately track index
performance or provide positive investment returns. S&P Dow
Jones Indices LLC and its subsidiaries are not investment advisors.
Inclusion of a security or futures contract within an index is not
a recommendation by S&P Dow Jones Indices to buy, sell, or hold
such security or futures contract, nor is it considered to be
investment advice. Notwithstanding the foregoing, CME Group Inc.
and its affiliates may independently issue and/or sponsor financial
products unrelated to the Notes currently being issued by us, but
which may be similar to and competitive with the Notes. In
addition, CME Group Inc. and its affiliates may trade financial
products which are linked to the performance of the SPX. It is
possible that this trading activity will affect the value of the
Notes.
S&P DOW JONES INDICES DO NOT GUARANTEE THE ADEQUACY, ACCURACY,
TIMELINESS AND/OR THE COMPLETENESS OF THE SPX OR ANY DATA RELATED
THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH
RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO
ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO
RESULTS TO BE OBTAINED BY US, BAC, BOFAS, MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED, HOLDERS OF THE NOTES, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE SPX OR WITH RESPECT TO ANY
DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST
TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR
OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS
OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
PS-32
SUPPLEMENTAL PLAN OF DISTRIBUTION; ROLE OF BOFAS AND Conflicts of
INterest
BofAS, a broker-dealer affiliate of ours, is a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”) and will
participate as a selling agent in the distribution of the notes.
Accordingly, the offering of the notes will conform to the
requirements of FINRA Rule 5121. The selling agent is a party to
the Distribution Agreement described in the “Supplemental Plan of
Distribution (Conflicts of Interest)” beginning on page S-66 of the
accompanying prospectus supplement.
The selling agent will receive the compensation set forth on the
cover page of this pricing supplement as to the notes sold through
its efforts. Certain dealers who purchase the notes for sale to
certain fee-based advisory accounts and/or eligible institutional
investors may forgo some or all of their selling concessions, fees
or commissions. The price to public for investors purchasing the
notes in these accounts may be as low as $990.00 (99.00%) per
$1,000 in principal amount of the notes. See “Supplemental Plan of
Distribution; Role of BofAS and Conflicts of Interest” in this
pricing supplement. We or one of our affiliates may pay varying
selling concessions of up to 1.00% in connection with the
distribution of the notes to other registered broker-dealers.
At BofAS’s discretion, for a short, undetermined initial period
after the issuance of the notes, BofAS may offer to buy the notes
in the secondary market at a price that may exceed the initial
estimated value of the notes. Any price offered by BofAS for the
notes will be based on then-prevailing market conditions and other
considerations, including the 2y SOFR Swap Rate, the level of the
SPX and the remaining term of the notes. However, none of us, the
Guarantor, BofAS or any of our other affiliates is obligated to
purchase your notes at any price or at any time, and we cannot
assure you that any party will purchase your notes at a price that
equals or exceeds the initial estimated value of the notes.
Any price that BofAS may pay to repurchase the notes will depend
upon then prevailing market conditions, the creditworthiness of us
and the Guarantor, and transaction costs. At certain times, this
price may be higher than or lower than the initial estimated value
of the notes.
Sales Outside of the United States
The Notes have not been approved for public sale in any
jurisdiction outside of the United States. There has been no
registration or filing as to the Notes with any regulatory,
securities, banking, or local authority outside of the United
States and no action has been taken by BofA Finance, BAC, BofAS or
any other affiliate of BAC, to offer the Notes in any jurisdiction
other than the United States. As such, these Notes are made
available to investors outside of the United States only in
jurisdictions where it is lawful to make such offer or sale and
only under circumstances that will result in compliance with
applicable laws and regulations, including private placement
requirements.
Further, no offer or sale of the Notes is being made to residents
of:
PS-33
You are urged to carefully review the selling restrictions that may
be applicable to your jurisdiction beginning on page S-68 of the
accompanying prospectus supplement.
European Economic Area and United Kingdom
None of this pricing supplement, the accompanying prospectus or the
accompanying prospectus supplement is a prospectus for the purposes
of the Prospectus Regulation (as defined below). This pricing
supplement, the accompanying prospectus and the accompanying
prospectus supplement have been prepared on the basis that any
offer of notes in any Member State of the European Economic Area
(the “EEA”) or the United Kingdom which has implemented the
Prospectus Regulation (each, a “Relevant Member State”) will only
be made to a legal entity which is a qualified investor under the
Prospectus Regulation (“Qualified Investors”). Accordingly any
person making or intending to make an offer in that Relevant Member
State of notes which are the subject of the offering contemplated
in this pricing supplement, the accompanying prospectus and the
accompanying prospectus supplement may only do so with respect to
Qualified Investors. Neither BofA Finance nor BAC has authorized,
nor does it authorize, the making of any offer of notes other than
to Qualified Investors. The expression “Prospectus Regulation”
means Regulation (EU) 2017/1129.
PROHIBITION OF SALES TO EEA AND UNITED KINGDOM RETAIL
INVESTORS – The notes are not intended to be offered, sold or
otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the EEA or the
United Kingdom. For these purposes: (a) a retail investor means a
person who is one (or more) of: (i) a retail client as defined in
point (11) of Article 4(1) of Directive 2014/65/EU, as amended
(“MiFID II”); or (ii) a customer within the meaning of Directive
(EU) 2016/97 (the Insurance Distribution Directive), where that
customer would not qualify as a professional client as defined in
point (10) of Article 4(1) of MiFID II; or (iii) not a qualified
investor as defined in the Prospectus Regulation; and (b) the
expression “offer” includes the communication in any form and by
any means of sufficient information on the terms of the offer and
the notes to be offered so as to enable an investor to decide to
purchase or subscribe for the notes. Consequently no key
information document required by Regulation (EU) No 1286/2014, as
amended (the “PRIIPs Regulation”) for offering or selling the notes
or otherwise making them available to retail investors in the EEA
or in the United Kingdom has been prepared and therefore offering
or selling the notes or otherwise making them available to any
retail investor in the EEA or in the United Kingdom may be unlawful
under the PRIIPs Regulation.
United Kingdom
The communication of this pricing supplement, the accompanying
prospectus supplement, the accompanying prospectus and any other
document or materials relating to the issue of the notes offered
hereby is not being made, and such documents and/or materials have
not been approved, by an authorized person for the purposes of
section 21 of the United Kingdom’s Financial Services and Markets
Act 2000, as amended (the “FSMA”). Accordingly, such documents
and/or materials are not being distributed to, and must not be
passed on to, the general public in the United Kingdom. The
communication of such documents and/or materials as a financial
promotion is only being made to those persons in the United Kingdom
who have professional experience in matters relating to investments
and who fall within the definition of investment professionals (as
defined in Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005, as amended (the “Financial
Promotion Order”)), or who fall within Article
PS-34
49(2)(a) to (d) of the Financial Promotion Order, or who are any
other persons to whom it may otherwise lawfully be made under the
Financial Promotion Order (all such persons together being referred
to as “relevant persons”). In the United Kingdom, the notes offered
hereby are only available to, and any investment or investment
activity to which this pricing supplement, the accompanying
prospectus supplement and the accompanying prospectus relates will
be engaged in only with, relevant persons. Any person in the United
Kingdom that is not a relevant person should not act or rely on
this pricing supplement, the accompanying prospectus supplement or
the accompanying prospectus or any of their contents.
Any invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) in connection with
the issue or sale of the notes may only be communicated or caused
to be communicated in circumstances in which Section 21(1) of the
FSMA does not apply to BofA Finance, as issuer, or BAC, as
guarantor.
All applicable provisions of the FSMA must be complied with in
respect to anything done by any person in relation to the notes in,
from or otherwise involving the United Kingdom.
PS-35
STRUCTURING THE NOTES
The notes are our debt securities, the return on which is linked to
the performance of both the 2y SOFR Swap Rate and the SPX. The
related guarantees are BAC’s obligations. As is the case for all of
our and BAC’s respective debt securities, including our
market-linked notes, the economic terms of the notes reflect our
and BAC’s actual or perceived creditworthiness at the time of
pricing. In addition, because market-linked notes result in
increased operational, funding and liability management costs to us
and BAC, BAC typically borrows the funds under these types of notes
at a rate, which we refer to in this pricing supplement as BAC’s
internal funding rate, that is more favorable to BAC than the rate
that it might pay for a conventional fixed or floating rate debt
security. This generally relatively lower internal funding rate,
which is reflected in the economic terms of the notes, along with
the fees and charges associated with market-linked notes, resulted
in the initial estimated value of the notes at the time the terms
of the notes are set and on the pricing date being less than their
public offering price.
In order to meet our payment obligations on the notes, at the time
we issue the notes, we may choose to enter into certain hedging
arrangements (which may include call options, put options or other
derivatives) with BofAS or one of our other affiliates. The terms
of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a
number of factors, including our and BAC’s creditworthiness,
interest rate movements, the volatility of 2y SOFR Swap Rate, the
tenor of the notes and the hedging arrangements. The economic terms
of the notes and their initial estimated value depend in part on
the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements will include
hedging related charges, reflecting the costs associated with, and
our affiliates’ profit earned from, these hedging arrangements.
Since hedging entails risk and may be influenced by unpredictable
market forces, actual profits or losses from these hedging
transactions may be more or less than any expected amounts.
For further information, see “Risk Factors” beginning on page PS-7
above.
VALIDITY OF THE NOTES
In the opinion of McGuireWoods LLP, as counsel to BofA Finance and
BAC, when the trustee has made the appropriate entries or notations
on the applicable schedule to the master global note that
represents the notes (the “master note”) identifying the notes
offered hereby as supplemental obligations thereunder in accordance
with the instructions of BofA Finance and the provisions of the
indenture governing the notes and the related guarantee, and the
notes have been delivered against payment therefor as contemplated
in this pricing supplement and the related prospectus, and
prospectus supplement, such notes will be the legal, valid and
binding obligations of BofA Finance, and the related guarantee will
be the legal, valid and binding obligation of BAC, subject, in each
case, to the effects of applicable bankruptcy, insolvency
(including laws relating to preferences, fraudulent transfers and
equitable subordination), reorganization, moratorium and other
similar laws affecting creditors’ rights generally, and to general
principles of equity. This opinion is given as of the date of this
pricing supplement and is limited to the laws of the State of New
York and the Delaware Limited Liability Company Act and the
Delaware General Corporation Law (including the statutory
provisions, all applicable provisions of the Delaware Constitution
and reported judicial decisions interpreting the foregoing) as in
effect on the date hereof. In addition, this opinion is subject to
customary assumptions about the trustee’s authorization, execution
and delivery of the indenture governing the notes and due
authentication of the master note, the validity, binding nature and
enforceability of the indenture governing the notes and the related
guarantee with respect to the trustee, the legal capacity of
individuals, the genuineness of signatures, the authenticity of all
documents submitted to McGuireWoods LLP as originals, the
conformity to original documents of all
PS-36
documents submitted to McGuireWoods LLP as copies thereof, the
authenticity of the originals of such copies and certain factual
matters, all as stated in the letter of McGuireWoods LLP dated
December 30, 2019, which has been filed as an exhibit to
Pre-Effective Amendment No. 1 to the Registration Statement (File
No. 333-234425) of BofA Finance and BAC, filed with the Securities
and Exchange Commission on December 30, 2019.
Sidley Austin LLP, New York, New York, is acting as counsel to
BofAS and as special tax counsel to BofA Finance and BAC.
PS-37
U.S. FEDERAL INCOME TAX SUMMARY
The following summary of the material U.S. federal income tax
considerations of the acquisition, ownership, and disposition of
the notes supplements, and to the extent inconsistent supersedes,
the discussions under “U.S. Federal Income Tax Considerations” in
the accompanying prospectus and under “U.S. Federal Income Tax
Considerations” in the accompanying prospectus supplement and is
not exhaustive of all possible tax considerations. This summary is
based upon the Internal Revenue Code of 1986 (the “Code”),
regulations promulgated under the Code by the U.S. Treasury
Department (“Treasury”) (including proposed and temporary
regulations), rulings, current administrative interpretations and
official pronouncements of the Internal Revenue Service (“IRS”),
and judicial decisions, all as currently in effect and all of which
are subject to differing interpretations or to change, possibly
with retroactive effect. No assurance can be given that the IRS
would not assert, or that a court would not sustain, a position
contrary to any of the tax consequences described below. This
summary does not include any description of the tax laws of any
state or local governments, or of any foreign government, that may
be applicable to a particular holder.
Although the notes are issued by us, they will be treated as if
they were issued by Bank of America Corporation for U.S. federal
income tax purposes. Accordingly throughout this tax discussion,
references to “we,” “our” or “us” are generally to Bank of America
Corporation unless the context requires otherwise.
This summary is directed solely to U.S. Holders and Non-U.S.
Holders that, except as otherwise specifically noted, will purchase
the notes upon original issuance and will hold the notes as capital
assets within the meaning of Section 1221 of the Code, which
generally means property held for investment, and that are not
excluded from the discussion under “U.S. Federal Income Tax
Considerations” in the accompanying prospectus. This discussion
does not address the tax consequences applicable to holders subject
to Section 451(b) of the Code. This summary assumes that the issue
price of the notes, as determined for U.S. federal income tax
purposes, equals the principal amount thereof.
You should consult your own tax advisor concerning the U.S.
federal income tax consequences to you of acquiring, owning, and
disposing of notes, as well as any tax consequences arising under
the laws of any state, local, foreign, or other tax jurisdiction
and the possible effects of changes in U.S. federal or other tax
laws.
U.S. Holders
We intend to treat the notes as
“variable rate debt instruments” for U.S. federal income tax
purposes, and the balance of this discussion assumes that this
characterization is proper and will be respected. Under this
characterization, interest on a note generally will be included in
the income of a U.S. Holder as ordinary income at the time it is
accrued or is received in accordance with the U.S. Holder’s regular
method of accounting for U.S. federal income tax purposes. Please
see the discussion in the prospectus under the section entitled
“U.S. Federal Income Tax Considerations—General—Consequences to
U.S. Holders—Variable Rate Debt Securities” for a discussion of
these rules.
Upon the sale, exchange or
retirement, or other disposition of a note, a U.S. Holder will
recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange, retirement or other disposition
(less an amount equal to any accrued interest not previously
included in income if the note is disposed of between interest
payment dates, which will be included in income as interest income
for U.S. federal income tax purposes) and the U.S. Holder’s
adjusted tax basis in the note. A U.S. Holder’s adjusted tax basis
in a note generally will be the cost of the note to such U.S.
Holder. Any gain or loss realized on the sale, exchange, retirement
or other disposition of a note generally will be capital gain or
loss and will be long-term
PS-38
capital gain or loss if the note has been held for more than one
year. The ability of U.S. Holders to deduct capital losses is
subject to limitations under the Code.
Non-U.S. Holders
Please see the discussion under
“U.S. Federal Income Tax Considerations—General—Consequences to
Non-U.S. Holders” in the accompanying prospectus for the material
U.S. federal income tax consequences that will apply to Non-U.S.
Holders of the notes.
Backup Withholding and Information Reporting
Please see the discussion under
“U.S. Federal Income Tax Considerations—General—Backup Withholding
and Information Reporting” in the accompanying prospectus for a
description of the applicability of the backup withholding and
information reporting rules to payments made on the
notes.
PS-39
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