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Countrywide Capital V (New) 7.0 Message Board

  • wheelbarrowme wheelbarrowme Aug 8, 2011 2:25 AM Flag

    Make Extra 10% Here ....Call Price is $25

    I picked up more CFC-pb during last Friday's price drop. I will make a nice additional 10% capital gain when BAC calls this trust preferred as required by the Dodd -Frank act. (There's a couple of replusive loser humans for you.) Key Corp just announced they were calling four Key Corp Trust Preferreds. Easy Money here.

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    • Dodd-Frank does not "require" banks to call preferred trusts. What Dodd-Frank does (for large banks) is it no longer allows them to treat trust preferreds as Tier 1 capital. The change is phased in over 3 years starting in Jan 2013. This change in the law is considered a "regulatory capital event" (or similar wording, depending on which boilerplate was used) which, in most, if not all, trust preferred prospectuses, ALLOWS for an accelerated call, but does not REQUIRE that these securities be called. Here's a link to a good summary of the treatment of trust preferreds under Dodd-Frank

      Calling these securities will use up capital that could otherwise be used to meet capital requirement rules, as BAC will have to redeem them for cash. Therefore, BAC is unlikely to call these preferreds before they have enough capital to satisfy regulators that they can pay a higher dividend on the common than the token that they are allowed to pay now - since paying a dividend on common is a much more publicly followed event than calling a trust preferred. So if anyone is counting on these securities to be called any time soon, I would suggest looking at similar securities issued by banks that have already increased their common dividends (KeyCorp increased their common dividend from 1¢ per share to 3¢ per share with the dividend paid on 6/15/11)

      Yes, these securities are likely to be called before maturity. But it won't be because of a "requirement" in Dodd-Frank, and it probably won't even be an accelerated call for CFC-B, which is callable as of 11/1/11 - less than 3 months from now.

25.72-0.01(-0.04%)May 27 4:00 PMEDT