No, I do not think CountryWide is independent of BAC. CountryWide is still a franchise and if on its own again, the trust preferreds would go with CountryWide. Since the bonds are a long term liability, and given the state of the current real estate market, what are the chances of CountryWide being an independent franchise in the foreseeable future? CountryWide, as Merrill, is best under the BAC umbrella. Who does not understand the situation?
chemicalladdie does not understand what is going on with the CFC bonds. He thinks they are independent of BAC and he is cheering the fact that Countrywide has "good" news. The truth, of course, is that if Countrywide subordinated bonds were only backed by Countrywide and not Bank of America, they would be worthless.
I occasionally post on the BML-Q board. I think that if you're buying CFC preferreds, you need to try to follow / digest the impact of all of BAC's businesses. For CFC-B holders, that includes following Merrill bread crumbs.
In any case, BML-Q only really looks attractive for taxable accounts. Right now I think the additional yield of BML-Q offsets the security interest and non-cumulative nature given its tax advantage. I also don't think it would be a bad thing if the issue went with Merrill if BAC spins them back off or sells them.
If you're buying CFC-A or CFC-B, you have to be considering other BAC issues too. The entire point of holding CFC-A or CFC-B is because you believe BAC debt is undervalued and you realize that the CFC issues are being sold at a discount relative to say BAC-X...
If you're doing that, extending the analysis to BAC's non-cumulative preferreds isn't that big a stretch.
I'm no tax expert, but I'm fairly sure buying CFC-B at a $5 discount to par doesn't invoke OID provisions. I believe those are for when an issue is originally sold at a discount.
In any case, CFC-B is best held in an IRA because it makes regular interest payments with will probably swamp the OID vs. capital gain issue. If you want better tax treatment, buy BML-Q. It's current yield is about 9.7% and it pays qualified dividends, making it a great deal for a taxable account if you can stomach the increased risk of a non-cumulative direct corporate preferred.
Short and medium term I agree that buying this in the 19's is a good investment - I also agree it will outperform the market in the next year. Longer term though I like other high divi stocks whose underlying assets increase with inflation.
With the roller coaster of the banks - also trying to use this to make some conservative cap gains also.(Downside is limited vs common)
If BAC is buying back on the market these securities - CFC-b or -a, those buys would not appear as "redemptions" would they? Or would an SEC filing be required to disclose them? It could even be "CFC" doing the buybacks if BAC is keeping arms-length from CFC - or is the separate entity re: bankruptcy possiblility a dead issue?