E-Gads LuckiJ! Capital trust shares are eligle for Tier one accounting because the payments can be suspended!
From the doc's
"The LLC is not required to pay dividends in all circumstances and dividends are not cumulative
The LLC is not required to pay dividends on the LLC preferred securities unless Holding or a subsidiary declares or makes a payment in respect of, or redeems, purchases or acquires any of Holding's ordinary shares or any parity securities. If, under those circumstances, the LLC does not declare and is not deemed to have declared any dividends on its preferred securities there will not be any payments due under the guarantees for such unpaid dividends. Although Holding has made regular dividend payments on its issued and outstanding ordinary shares and preferred and preference shares since its establishment in 1990, it is not obligated to continue to do so.
Distributions on the trust preferred securities and the dividends on the LLC preferred securities are not cumulative. You will therefore not be entitled to recover any distribution payments for any periods for which dividends on the LLC preferred securities or the trust preferred securities have not been declared or deemed declared, even if funds subsequently become available to the Trust or the LLC, as the case may be."
I actually lost my notes on this (hard drive crashed last summer). But, generally, these preferred are trust preferred, and so have a contigent guarantee from the parent. Now, the NV parent is really now a paper entity, and I believe that RBS itself may have to pick up that guarantee; indeed, RBS did pick up a guarantee on some ABN EU securities last year, and I think it is on the NV page of the RBS website (if I get back to it, and find it, will post). When the 1st Half results are out, you need to check to see how much money they are putting in the parent (money that can be used to support the contigent guarantee after next year).
Second, these trust preferreds are not discretionary as are the RBS equity preferred. We do not even know under what clause they were suspended, but I believe it may be the prospectus clause allowing the Dutch authorities to simply request suspension (which, in turn, is now EU authorities). In any event, the suspension is not completely discretionary.
Third, these preferred were part of Tier 1 of RBS NV (page 170 annual report), and this is non-core Tier 1, or lower Tier 1. They do not qualify as core Tier 1 and will in the future not qualify as lower Tier 1 -- I believe it was mentioned in an RBS investor presentation that they would like to do some capital enhancements but cannot do so till the suspension period is lifted. At some point they will need to make an offer on these or tender them.
I should have mentioned the tax thing. I do everything in an IRA account so it doesn't matter for me.
As to What can happen on Jan 1, here's a story and it doesn't look good.
And Cheers back atcha. Speaking of buying at par, I've never bought preferreds at par (yet) but thinking about some American Capital Agency 8% preferred A. Symbol - AGNCP. Recently issued, trading slightly above par and CUMULATIVE. I have a little of the common which currently yields 15%. (My yield is a little better due to a better cost basis.) While the common dividend may not remain safe at such time as the interest rate yield curve starts to flatten (and which then will probably cause the common to tank), the preferred coupon should have a margin of safety. Hey -just throwin' that out there.