Subject to Completion
Preliminary Term Sheet dated July 19, 2021 |
Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-234425 (To Prospectus dated December 31, 2019, Prospectus Supplement dated December 31, 2019 and Product Supplement COMM LIRN-1 dated July 15, 2021) |
Units
$10 principal amount per unit CUSIP No. |
Pricing Date*
Settlement Date* Maturity Date* |
July , 2021
August , 2021 January , 2024 |
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*Subject to change based on the actual date the notes are priced for initial sale to the public (the pricing date)
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BofA Finance LLC
Leveraged Index Return Notes® Linked to a Basket of Three Commodities
Fully and Unconditionally Guaranteed by Bank of America Corporation
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Maturity of approximately 2.5 years
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[118.00% to 128.00%] leveraged upside exposure to increases in the Basket
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The Basket will be comprised of the WTI Crude Oil Futures Contract, the Copper Spot Price, and the Silver Spot Price. Each Basket Component will be given an approximately equal weight.
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1-to-1 downside exposure to decreases in the Basket, with up to 100.00% of your principal at risk
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All payments occur at maturity and 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
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No periodic interest payments
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In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per unit. See Structuring the Notes
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Limited secondary market liquidity, with no exchange listing
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Per Unit
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Total
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Public offering price(1)
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$10.00
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$
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Underwriting discount(1)
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$ 0.20
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$
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Proceeds, before expenses, to BofA Finance
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$ 9.80
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$
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(1)
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For any purchase of 300,000 units or more in a single transaction by an individual investor or in combined transactions with the investor’s household in this offering, the public offering price and the underwriting discount will be $9.95 per unit and $0.15 per unit, respectively. See Supplement to the Plan of Distribution; Conflicts of Interest below.
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-2
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-3
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
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Product supplement COMM LIRN-1 dated July 15, 2021:
https://www.sec.gov/Archives/edgar/data/70858/000119312521216586/d218238d424b5.htm |
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Series A MTN prospectus supplement dated December 31, 2019 and prospectus dated December 31, 2019:
https://www.sec.gov/Archives/edgar/data/70858/000119312519326462/d859470d424b3.htm |
You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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You anticipate that the value of the Basket will increase from the Starting Value to the Ending Value.
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You are willing to risk a loss of principal and return if the value of the Basket decreases from the Starting Value to the Ending Value that is below the Threshold Value.
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You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
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You are willing to forgo the rights and benefits of owning a Basket Component or any related futures contract.
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You are willing to accept a limited or no market for sales 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.
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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.
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You believe that the value of the Basket will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
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You seek 100% principal repayment or preservation of capital.
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You seek interest payments or other current income on your investment.
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You want to receive the rights and benefits of owning a Basket Component or any related futures contracts.
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You seek an investment for which there will be a liquid secondary market.
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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.
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Leveraged Index Return Notes®
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TS-4
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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This graph reflects the returns on the notes, based on the Threshold Value of 100% of the Starting Value and a hypothetical Participation Rate 123.00% (the midpoint of the Participation Rate range of [118.00% to 128.00%]). The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in WTI crude oil, copper and silver, as measured by the Basket Components.
This graph has been prepared for purposes of illustration only.
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Ending Value
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Percentage Change from the Starting Value to the Ending Value
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Redemption Amount per Unit(1)
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Total Rate of Return on the Notes
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0.00
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-100.00%
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$0.000
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-100.00%
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50.00
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-50.00%
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$5.000
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-50.00%
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80.00
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-20.00%
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$8.000
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-20.00%
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85.00
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-15.00%
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$8.500
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-15.00%
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90.00
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-10.00%
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$9.000
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-10.00%
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94.00
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-6.00%
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$9.400
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-6.00%
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95.00
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-5.00%
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$9.500
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-5.00%
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97.00
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-3.00%
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$9.700
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-3.00%
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100.00(2)(3)
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0.00%
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$10.000
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0.00%
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102.00
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2.00%
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$10.246
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2.46%
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105.00
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5.00%
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$10.615
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6.15%
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110.00
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10.00%
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$11.230
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12.30%
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120.00
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20.00%
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$12.460
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24.60%
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130.00
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30.00%
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$13.690
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36.90%
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140.00
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40.00%
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$14.920
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49.20%
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150.00
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50.00%
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$16.150
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61.50%
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160.00
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60.00%
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$17.380
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73.80%
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(1)
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The Redemption Amount per unit is based on the hypothetical Participation Rate.
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(2)
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This is the Threshold Value.
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(3)
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The Starting Value will be set to 100.00 on the pricing date.
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Leveraged Index Return Notes®
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TS-5
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Example 1
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The Ending Value is 90.00, or 90.00% of the Starting Value:
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Starting Value: 100.00
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Threshold Value: 100.00
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Ending Value: 90.00
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Redemption Amount per unit
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Example 2
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The Ending Value is 150.00, or 150.00% of the Starting Value:
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Starting Value: 100.00
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Ending Value: 150.00
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= $16.15 Redemption Amount per unit
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Leveraged Index Return Notes®
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TS-6
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
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Depending on the performance of the Basket as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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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.
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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.
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We are a finance subsidiary and, as such, have no independent assets, operations or revenues.
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BAC’s obligations under its guarantee of the notes will be structurally subordinated to liabilities of its subsidiaries.
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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; and 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.
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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.
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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 Basket, changes in BAC’s internal funding rate, and the inclusion in the public offering price of the underwriting discount and the hedging-related charge, all as further described in Structuring the Notes beginning on page TS-17. 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.
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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.
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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 the notes at any price in any secondary market.
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BAC and its affiliates’ hedging and trading activities (including trades related to the Basket Components and the related futures contracts) 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.
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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.
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Changes in the price of one of the Basket Components may be offset by changes in the prices of the other Basket Components.
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Ownership of the notes will not entitle you to any rights with respect to any Basket Component or any related futures contracts.
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Suspensions or disruptions of trading in any Basket Component and any related futures contracts may adversely affect the value of the notes
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Leveraged Index Return Notes®
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TS-7
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
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Changes in exchange methodology related to a Basket Component may adversely affect the value of the notes prior to maturity.
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Legal and regulatory changes could adversely affect the return on and value of your notes.
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The notes will not be regulated by the U.S. Commodity Futures Trading Commission.
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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-31 of the accompanying product supplement.
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Leveraged Index Return Notes®
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TS-8
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-9
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Basket Component
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Bloomberg Symbol
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Initial Component Weight
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Closing Value(1)(2)
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Hypothetical Component Ratio(1)(3)
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Initial Basket Value Contribution
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WTI Crude Oil Futures Contract
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CL1
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33.34%
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$71.65 |
0.46531752
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33.34
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Copper Spot Price
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LOCADY
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33.33%
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$9,347.00
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0.00356585
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33.33
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Silver Spot Price
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SLVRLN
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33.33%
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$2,620.50
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0.01271895
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33.33
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Starting Value
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100.00
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(1)
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The actual closing value of each Basket Component and the resulting actual Component Ratios will be determined on the pricing date, subject to adjustment as more fully described in the section entitled Description of LIRNs—Basket Market Measures—Determination of the Component Ratio for Each Basket Component beginning on page PS-34 of the accompanying product supplement if a Market Disruption Event occurs on the pricing date as to any Basket Component. In addition, if the pricing date is determined by the calculation agent not to be a Market Measure Business Day for any Basket Component by reason of an extraordinary event, occurrence, declaration or otherwise, the calculation agent will establish the closing value of that Basket Component, and thus its Component Ratio, in the same manner as if a Market Disruption Event occurred as to that Basket Component.
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(2)
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These were the closing values of the Basket Components on July 15, 2021.
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(3)
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Each hypothetical Component Ratio equals the Initial Component Weight of the relevant Basket Component (as a percentage) multiplied by 100, and then divided by the closing value of that Basket Component on July 15, 2021 and rounded to eight decimal places.
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Leveraged Index Return Notes®
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TS-10
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-11
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-12
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-13
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-14
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
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the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not directly above or below the individual investor;
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a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the investor’s household as described above; and
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a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any purchases made by a trustee’s personal account.
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Leveraged Index Return Notes®
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TS-15
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
Leveraged Index Return Notes®
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TS-16
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Leveraged Index Return Notes®
Linked to a Basket of Three Commodities, due January , 2024 |
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
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You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as a single financial contract with respect to the Basket.
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning on page 50 of the prospectus) generally will recognize capital gain or loss upon maturity or upon a sale or exchange of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year.
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No assurance can be given that the Internal Revenue Service (IRS) or any court will agree with this characterization and tax treatment.
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Leveraged Index Return Notes®
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TS-17
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