|
Subject to Completion
Preliminary Term Sheet
dated June 12, 2024
|
Filed Pursuant to Rule 424(b)(2)
Registration Statement Nos. 333-268718
and 333-268718-01
(To Prospectus dated December 30, 2022,
Prospectus Supplement dated December 30, 2022 and
Product Supplement STOCK CYN-1 dated August 2, 2023) |
Units
$10 principal amount per unit CUSIP No. |
Pricing Date*
Settlement Date* Maturity Date* |
June , 2024
June , 2024 June , 2025 |
|||
![]() |
*Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”)
|
||||
|
|
|
|
||
BofA Finance LLC
Fixed Coupon Barrier Notes Linked to a Basket of Two
Stocks Fully and Unconditionally Guaranteed by Bank of America Corporation
■
A Fixed Coupon Payment of between [$0.300 and $0.325] payable quarterly on each Coupon Payment Date.
■
Maturity of approximately one year.
■
At maturity, if the value of the Basket has not decreased by more than 20%, a return of principal; otherwise, 1-to-1 downside exposure to decreases in the Basket from the Starting Value, with up to 100.00% of the principal amount at risk. At maturity you will also receive the final Fixed Coupon Payment, regardless of the performance of the Basket.
■
The Basket will be comprised of the Class A common stock of CrowdStrike Holdings, Inc. and the common stock of Palo Alto Networks, Inc. (each, a “Basket Stock”). Each Basket Stock will be given an equal weight.
■
All payments are subject to the credit risk of BofA Finance LLC, as issuer of the notes, and the credit risk of Bank of America Corporation, as guarantor of the notes
■
Limited secondary market liquidity, with no exchange listing
|
|
Per Unit
|
Total
|
Public offering price
|
$10.00
|
$
|
Underwriting discount
|
$ 0.10
|
$
|
Proceeds, before expenses, to BofA Finance
|
$ 9.90
|
$
|
Are Not FDIC Insured
|
Are Not Bank Guaranteed
|
May Lose Value
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Terms of the Notes
|
|
|
Issuer:
|
BofA Finance LLC (“BofA Finance”)
|
|
Guarantor:
|
Bank of America Corporation (“BAC”)
|
|
Principal Amount:
|
$10.00 per unit
|
|
Term:
|
Approximately one year
|
|
Market Measure:
|
An equally weighted basket of two stocks comprised of the Class A common stock of CrowdStrike Holdings, Inc. (Nasdaq Global Select Market symbol: “CRWD”) and the common stock of Palo Alto Networks, Inc. (Nasdaq Global Select Market symbol: “PANW”). Each of CrowdStrike Holdings, Inc. and Palo Alto Networks, Inc. is an "Underlying Company".
|
|
Call Feature:
|
Not applicable. Notwithstanding anything to the contrary in the accompanying product supplement, the notes will not be Issuer Callable Notes or Autocallable Notes.
|
|
Coupon Feature:
|
Fixed Coupon Payments
|
|
Barrier:
|
Applicable
|
|
Threshold Value:
|
80% of the Starting Value
|
|
Fixed Coupon Payments:
|
The notes will pay a quarterly Fixed Coupon Payment of between [$0.300 and $0.325] on each Coupon Payment Date. The actual Fixed Coupon Payment will be determined on the pricing date.
|
|
Starting Value:
|
The Starting Value will be set to 100.00 on the pricing date.
|
|
Ending Value:
|
The value of the Basket on the Final Calculation Day calculated as specified in “The Basket” on page TS-10 of this term sheet and in “Description of the Notes–Baskets—Observation Value or Ending Value of the Basket” on page PS-42 of the accompanying product supplement. The scheduled Final Calculation Day is subject to postponement in the event of Market Disruption Events, as described beginning on page PS-32 of the accompanying product supplement.
|
|
Coupon Payment Dates:
|
September , 2024, December , 2024, March , 2025 and June , 2025 (the maturity date).
|
|
Final Calculation Day/Maturity Valuation Period:
|
Approximately the fifth scheduled trading day immediately preceding the maturity date.
|
|
Price Multiplier:
|
For each Basket Stock, 1, subject to adjustments for certain corporate events relating to that Basket Stock described beginning on PS-33 of the accompanying product supplement.
|
|
Fees and Charges:
|
The underwriting discount of $0.10 per unit listed on the cover page.
|
|
Calculation Agent:
|
BofA Securities, Inc. (“BofAS”), an affiliate of BofA Finance.
|
Fixed Coupon Barrier Notes
|
TS-2
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Fixed Coupon Barrier Notes
|
TS-3
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
■
|
Product supplement STOCK CYN-1 dated August 2, 2023:*
|
■
|
Series A MTN prospectus supplement dated December 30, 2022 and prospectus dated December 30, 2022:
https://www.sec.gov/Archives/edgar/data/1682472/000119312522315195/d409418d424b3.htm |
You may wish to consider an investment in the notes if:
|
The notes may not be an appropriate investment for you if:
|
■
You anticipate that the Basket will not decrease from the Starting Value to an Ending Value that is below the Threshold Value.
■
You accept that the return on the notes will be limited to the return represented by the Fixed Coupon Payments even if the percentage change in the value of the Basket is significantly greater than such return.
■
You are willing to lose up to 100% of the principal amount.
■
You are willing to forgo dividends or other benefits of owning shares of the Basket Stocks.
■
You are willing to accept a limited or no market for sales of the notes prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our and BAC’s actual and perceived creditworthiness, BAC’s internal funding rate and fees and charges on the notes.
■
You are willing to assume our credit risk, as issuer of the notes, and BAC’s credit risk, as guarantor of the notes. for all payments under the notes, including the Redemption Amount.
|
■
You seek an uncapped return on your investment.
■
You seek principal repayment or preservation of capital.
■
You want to receive dividends or other distributions paid on the Basket Stocks.
■
You seek an investment for which there will be a liquid secondary market.
■
You are unwilling or are unable to take market risk on the notes, to take our credit risk, as issuer of the notes, or to take BAC’s credit risk, as guarantor of the notes.
|
Fixed Coupon Barrier Notes
|
TS-4
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
1)
|
the Starting Value of 100.00;
|
2)
|
the Threshold Value of 80.00;
|
3)
|
an expected term of the notes of approximately one year; and
|
4)
|
a Fixed Coupon Payment of $0.3125 per unit (the mid-point of the Fixed Coupon Payment range).
|
Ending Value
|
Percentage Change from the Starting Value to the Ending Value
|
Redemption Amount per Unit (including the final Fixed Coupon Payment)(3)
|
Return on the notes(4)
|
0.00
|
-100.00%
|
$0.3125
|
-96.875%
|
20.00
|
-80.00%
|
$2.3125
|
-76.875%
|
30.00
|
-70.00%
|
$3.3125
|
-66.875%
|
40.00
|
-60.00%
|
$4.3125
|
-56.875%
|
50.00
|
-50.00%
|
$5.3125
|
-46.875%
|
79.99
|
-20.01%
|
$8.3115
|
-16.885%
|
80.00(1)
|
-20.00%
|
$10.3125
|
3.125%
|
97.00
|
-3.00%
|
$10.3125
|
3.125%
|
100.00(2)
|
0.00%
|
$10.3125
|
3.125%
|
102.00
|
2.00%
|
$10.3125
|
3.125%
|
105.00
|
5.00%
|
$10.3125
|
3.125%
|
107.00
|
7.00%
|
$10.3125
|
3.125%
|
120.00
|
20.00%
|
$10.3125
|
3.125%
|
150.00
|
50.00%
|
$10.3125
|
3.125%
|
200.00
|
100.00%
|
$10.3125
|
3.125%
|
Fixed Coupon Barrier Notes
|
TS-5
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
■
|
If the Ending Value is less than the Threshold Value, you will lose up to 100% of the principal amount.
|
■
|
Your investment return is limited to the return represented by the Fixed Coupon Payments and may be less than a comparable investment directly in the Basket Stocks.
|
■
|
The Redemption Amount will not reflect changes in the value of the Basket other than on the Final Calculation Day.
|
■
|
Changes in the price of one Basket Stock may be offset by changes in the price of the other Basket Stock.
|
■
|
Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
|
■
|
Payments on the notes are subject to our credit risk, and the credit risk of BAC, and any actual or perceived changes in our or BAC’s creditworthiness are expected to affect the value of the notes. If we and BAC become insolvent or are unable to pay our respective obligations, you may lose your entire investment.
|
■
|
We are a finance subsidiary and, as such, have no independent assets, operations or revenues.
|
■
|
BAC’s obligations under its guarantee of the notes will be structurally subordinated to liabilities of its subsidiaries.
|
■
|
The notes issued by us will not have the benefit of any cross-default or cross-acceleration with other indebtedness of BofA Finance or BAC; events of bankruptcy or insolvency or resolution proceedings relating to BAC and covenant breach by BAC will not constitute an event of default with respect to the notes.
|
■
|
The initial estimated value of the notes considers certain assumptions and variables and relies in part on certain forecasts about future events, which may prove to be incorrect. The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit spreads and those of BAC, BAC’s internal funding rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and 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 public offering price you pay for the notes will exceed the initial estimated value. 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 the initial estimated value. This is due to, among other things, changes in the value of the Market Measure, changes in BAC’s internal funding rate, and the inclusion in the public offering price of the underwriting discount and costs associated with hedging the notes, all as further described in “Structuring the Notes” on page TS-13. 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.
|
■
|
The initial estimated value does not represent a minimum or maximum price at which we, BAC, MLPF&S, 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 issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Basket, our and BAC’s creditworthiness and changes in market conditions.
|
■
|
A trading market is not expected to develop for the notes. None of us, BAC, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.
|
■
|
BAC and its affiliates’ hedging and trading activities (including trades in shares of the Basket Stocks) and any hedging and trading activities BAC or its affiliates engage in that are not for your account or on your behalf, may affect the market value and return of the notes and may create conflicts of interest with 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.
|
Fixed Coupon Barrier Notes
|
TS-6
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
■
|
An Underlying Company will have no obligations relating to the notes, and none of us, BAC, MLPF&S or BofAS will perform any due diligence procedures with respect to any Underlying Company in connection with this offering.
|
■
|
You will have no rights of a holder of the Basket Stocks and you will not be entitled to receive shares of the Basket Stocks or dividends or other distributions by any Underlying Company.
|
■
|
While BAC and our other affiliates may from time to time own securities of the Underlying Companies, we, BAC and our other affiliates do not control any Underlying Company, and have not verified any disclosure made by any Underlying Company.
|
■
|
Payments on the notes will not be adjusted for all corporate events that could affect the Basket Stocks. See “Description of the Notes—Anti-Dilution Adjustments” beginning on page PS-33 of the accompanying product supplement.
|
■
|
The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See “Summary Tax Consequences” below and “U.S. Federal Income Tax Summary” beginning on page PS-45 of the accompanying product supplement.
|
Fixed Coupon Barrier Notes
|
TS-7
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Basket Stock
|
|
Bloomberg Symbol
|
|
Initial Component Weight
|
|
Closing Market Price(1)(2)
|
|
Hypothetical Component Ratio(1)(3)
|
|
Initial Basket Value Contribution
|
CrowdStrike Holdings, Inc.
|
|
CRWD
|
|
50.00%
|
|
$374.57
|
|
0.13348640
|
|
50.00
|
Palo Alto Networks, Inc.
|
|
PANW
|
|
50.00%
|
|
$309.05
|
|
0.16178612
|
|
50.00
|
|
|
|
|
|
|
|
|
Starting Value
|
|
100.00
|
(1)
|
The actual Closing Market Price of each Basket Stock and the resulting actual Component Ratios will be determined on the pricing date and will be set forth in the final term sheet that will be made available in connection with sales of the notes.
|
(2)
|
These were the Closing Market Prices of the Basket Stocks on June 10, 2024.
|
(3)
|
Each hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket Stock (as a percentage) multiplied by 100, and then divided by the Closing Market Price of that Basket Stock on June 10, 2024 and rounded to eight decimal places.
|
Fixed Coupon Barrier Notes
|
TS-8
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Fixed Coupon Barrier Notes
|
TS-9
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Fixed Coupon Barrier Notes
|
TS-10
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Fixed Coupon Barrier Notes
|
TS-11
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Fixed Coupon Barrier Notes
|
TS-12
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
Fixed Coupon Barrier Notes
|
TS-13
|
Fixed Coupon Barrier Notes
Linked to a Basket of Two Stocks, due June , 2025 |
|
■
|
There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
|
■
|
We intend to treat the notes for all tax purposes as a unit (a “Unit”) consisting of (i) a put option (the “Put Option”) written by you to us that, if exercised, requires you to pay us an amount equal to the Deposit (as defined below) in exchange for a cash amount based upon the performance of the Basket; and (ii) a deposit with us of a fixed amount of cash, equal to the issue price of the note, to secure your obligation under the Put Option (the “Deposit”) that pays you interest based on our cost of borrowing at the time of issuance (the “Deposit Interest”).
|
■
|
Based on the treatment of each note as a Unit consisting of the Put Option and the Deposit, as of the date of this term sheet, it would be reasonable to allocate each Fixed Coupon Payment between the Deposit and the Put Option and treat 41% of each Fixed Coupon Payment as Deposit Interest and 59% of each Fixed Coupon Payment as Put Option premium. The actual allocation will be determined on the trade date and will be set forth in the final term sheet. Under this approach, it would be reasonable to allocate 100% of the issue price of a note to the Deposit and none to the Put Option.
|
■
|
The Deposit Interest payments will be included in the income of a U.S. Holder (as defined in the prospectus) as interest at the time that such interest is accrued or received in accordance with such U.S. Holder’s regular method of tax accounting. The Put Option premium will not be included in the income of a U.S. Holder until the sale, exchange or maturity of the notes. Accordingly, all of the Put Option premium payments on the notes (except for the last Put Option premium payment) generally will not be included in the income of a U.S. Holder when they are received.
|
■
|
See “U.S. Federal Income Tax Summary” beginning on page PS-46 of the accompanying product supplement for a description of the U.S. federal income tax consequences to a U.S. Holder upon sale, exchange or maturity of a note.
|
■
|
If you are a Non-U.S. Holder (as defined in the prospectus), subject to the discussions in the accompanying product supplement regarding the potential application of Section 871(m) of the Code and FATCA, Coupon Payments with respect to a note, and gain realized on the sale, exchange or redemption of such note, should not be subject to U.S. federal income or withholding tax under current law.
|
■
|
Under current IRS guidance, withholding on “dividend equivalent” payments (as discussed in the product supplement), if any, will not apply to notes that are issued as of the date of this term sheet unless such notes are “delta-one” instruments.
|
Fixed Coupon Barrier Notes
|
TS-14
|