Yes this is a grat buy under $20. The BAC 7% is trading for $2 more right this second to yield 8% while the CFC 7% is yielding 8.9%. In addtion if BAC takes this out they have to pay $25. I do not see them suspending the dividend. They have plenty of capital. They just sold their forgeign card business for a few billion dollars. Their China Bank investment which is on the block is said to be worth $15 to $17 billion. Doug Kass who is a top notch short player just went long BAC common. He said that BAC stock has the worst of everything priced in. The tangible book value is over $12. This includes mega billions held in reserves for future losses. They would need to incur an addtional $60 billion in losses to bring tangible book value down to this $6.50 trading price.
The panic returns. I bought this when it was issued in 2006 and watched it drop to under $7.00/share. CFC and BAC have never missed a dividend payment even in the dark days of the 08/09 financial meltdown. I had enough courage to buy some more and average my price downward. I am thinking about it again since my cost is slightly north of today's close.
Someone is seriously thinking BAC will declare bankruptcy or default on these issues. This is probably due to continual onslaught of lawsuits related to CFC's questionable practices. I am surprised with the Dodd-Frank rules that these banks don't call all these issues to save the interest payments, As I understand it D/F changes the ability to count these issues as Tier I capital. If BAC can borrow at 4.5% interest (or less) or even tempt the Preferred Trust share owners into a conversion (ala Citigroup) to common shares, they could save some dough. A default would seem to me to be a poor choice for America's Bank due to additional negative ramifications.
Unless they default it's a great investment. Remember that only a few months ago, Moynihan was seeking Fed approval to increase the common dividend. He must have thought he had adequate resources.
Definitely a good buy under $20, I paid $25.03 when CFC-pb was an IPO. Be aware that interest on any trust preferred shares can be suspended for up to 5 years. Before that can happen, dividends on common shares have to also be eliminated, but both events could happen at the same time.