BankAmerica Corp.'s yearlong effort to fortify capital continued Monday as the banking company issued $500 million in debt.

And another offering may be in the wings. The San Francisco-based company is expected to issue $300 million to $350 million of preferred stock within two weeks, analysts said.

Those moves would help bolster the bank's capital ratio, which was depressed a bit by the acquisition of Security Pacific Corp.

Comfortable Ratio

At March 31, BankAmerica reported that its total capital equaled 12.26% of risk-based assets. After the merger was completed in April, the ratio dropped to an estimated 10.8% - still comfortably in excess of the 8% minimum that takes effect at yearend.

The $500 million of 10-year subordinated notes issued Monday will boost its capital ratio by about 20 basis points, to 11%, according to Fitch Investors Service Inc. The offering was made the day before the end of the quarter and therefore will show up in second-quarter results, which will be the first since the merger.

|Very Positive Sign'

A $300 million preferred offering would increase the ratio by another 20 basis points, to 11.2% Fitch estimated. Fitch rated the debt issue single-A plus.

"BankAmerica's overall trend is going up, even though it swallowed a huge bank in Security Pacific," said Fred W. Debussey, an analyst with Fitch. "That's a very positive sign."

BankAmerica had already taken sizable steps to boost capital to prepare for the merger. The company issued $550 million in debt and $365 million in preferred stock in the first quarter.

BankAmerica's capital ratios may get another boost next quarter. The company plans to establish a "bad" bank to liquidate up to $4 billion in nonperforming assets.

Investors signaled their support of the merger. The newly issued debt was priced a relatively tight 84 basis points over comparable Treasury securities and pays 7.75% interest.

Of the half-dozen banks that have issued subordinated debt in the past two weeks, taking advantage of the most eager market in years, the spreads have varied from 84 to 117 basis points. The lowest rate paid on the debt was 8%, by First Bank System in Minneapolis.

The welcome BankAmerica got from investors will likely spur other banks to issue debt. "The BankAmerica deal is only one of several we expect this week," said an investment banker. With long-term bond rates relatively low, the debt makes a good investment while providing cheap funding for the issuer.

Flexibility in Funding

BankAmerica declined to specify how the proceeds will be used. The bank could pay off more expensive debt.

"BankAmerica is not rebuilding from weakness," said Arthur P. Soter, an analyst with Morgan Stanley & Co. "It is very amply capitalized. This step will give them additional flexibility in funding."

Or, the new capital could be tossed into a warchest. "Obviously, BankAmerica is not finished growing," said Campbell Chaney, and analyst with Sutro & Co. "It is going to have a period of integration with the Security Pacific deal and it may not have a major acquisition on the horizon. But it will do more acquisitions."

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