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  • normlasky normlasky May 19, 2011 7:57 PM Flag

    bbt preferred- at what price if called

    "BBT's TRUPS are all currently trading well above $25 per share and their call dates are still over two years away. BBT cannot call their TRUPS shares prior to their call dates."

    Above statement made in article I posted imo is not accurate. Bbt - a, b and c shares are likely to be called in early 2013 when the shares will not longer be able to be counted as tier 1 capital. Page S-10 of bbt-a prospectus states:



    "We may redeem any or all of the junior subordinated debentures at any time on or after September 15, 2013 and we may elect to redeem all, but not less than all, of the junior subordinated debentures before September 15, 2013 if certain changes occur relating to the capital treatment or tax treatment of the capital securities, the investment company laws or the rating agency equity credit accorded to the capital securities. The redemption price will equal 100% of the principal amount of the junior subordinated debentures plus accrued and unpaid interest to the date of redemption in the case of a redemption after the occurrence of a capital treatment event, investment company event or tax event and a make-whole redemption price in the case of a redemption after the occurrence of a rating agency event. An IRS pronouncement or threatened challenge affecting the tax treatment of the junior subordinated debentures could occur at any time. Similarly, changes in rating agency methodology for assigning equity credit to the junior subordinated debentures, changes or proposed changes in the treatment of the junior subordinated debentures for Federal Reserve capital adequacy purposes and changes resulting in the treatment of the trust as an “investment company” could result in the junior subordinated debentures being redeemed earlier than would otherwise be the case. See “Summary of Terms of the Junior Subordinated Debentures—Redemption” for a further description of these events and the method of determining the make-whole redemption price that applies in the case of a redemption after the occurrence of a rating agency event."

    Imo, the $1 to $1.50 premium for a, b and c shares will be wiped out in 19 months so you can deduct this off any interest to be earned through 2012 when calculating yield which I think is around 6% annually.

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    • Look at the clause in 41 on their prospectus. They can call anytime if the Govt. changes the rules, which they have done. This is why we see 500,000 shares trade on the downside yesterday, etc.

      • 1 Reply to oracle1234
      • "Look at the clause in 41 on their prospectus. They can call anytime if the Govt. changes the rules, which they have done. This is why we see 500,000 shares trade on the downside yesterday, etc."

        All preferred trust shares will not be called until the end of 2013 per page 58 of their 1st qtr. 2011 q statement (see below). So to answer your question Ted, you have 31 months before the shares are called. If the premium for the preferred shares is say $1.50 ($26.50), you have to deduct about $.60 per year from the annual interest payment through the end of 2013 to calculate your interest income.


        "During the first quarter of 2011, the Federal Reserve completed a review of BB&T’s capital plan, along with the plans of the other 18 largest financial institutions. The Federal Reserve had no objections to BB&T’s plan to increase the dividend on common stock. Following this determination, BB&T’s Board of Directors increased the quarterly dividend amount to $0.16 per share, a 6.7% increase compared to the prior quarterly amount. In addition, the Board of Directors declared a special $0.01 per share dividend. BB&T also made the decision to retire all of its $3.2 billion in trust preferred securities by the end of 2013. In advance of retiring these instruments, management plans to issue approximately $1.75 billion of Tier 1 qualifying instruments in order to maximize the amount of these types of instruments allowable under the Basel III capital standards."

 
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