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Countrywide Capital V (New) 7.0 Message Board

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  • Kansaskeith Kansaskeith Oct 14, 2008 12:13 PM Flag

    Govt preferred


    According to Quantum, what they are legally is "trust preferred securities," which have as their assets "the 7.00% Junior Subordinated Deferrable Interest Debentures due 11/01/2036 . . . that were purchased from the company using the funds generated from the sale of the trust preferred securities."

    Obviously, it is complex, and once again makes me nervous about the intracacies of instruments you almost need a graduate degree to understand.

    But, should the news Mr. Liesman originally and tentatively referred to this morning before the bell had been the case. . . . should B of A as a participant in the government program been required to suspend payment of preferred dividends. . . . I think the absolute BEST case would have been that the share value tanked near to zero while the experts debated whether said suspension covered the distributions on instruments like ours.

    I watched a similar tank occur with my Wachovia Preferred Funding the morning Citi made its now-defunct deal with Wachovia, and the news moved that the preferred may be wiped out. My shares (par $25) dropped as low as 1.50, and were suspended altogether for much of the day, but then came back when people realized this particular preferred instrument wasn't covered by the original statement of preferred being wiped out, and actually ended up being one of the few NYSE issues that actually closed UP on that horrible Monday that the Dow was down 788.

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    • I also hold WNA, but only became aware of it after the situation got sorted out. I don't think WNA was ever in a position to be wiped out, the reason the price went to 1.5 for a few seconds and then to 5-6 for a couple of days was because people weren't thinking straight. The only two options were WNA was going to be going to Citi or was going to be the most senior element in the left behind brokerage structure as were the other WB prefs (though dividends might have been suspended for a while). And smart people like Ackman were buying up the WB stock junior to WB prefs. Who was selling WNA at $1.5-$6 when clearly it states in the absence of a conversion event (which was averted by the deal) they are backed by 10x the issue value in loans? Who was willing to take almost a complete loss on securities that almost certainly would be worth near par (or at least half par for sure) under the announced deal? Don't people know what they own? Or maybe its computer trading driven. In my opinion their value increased as a result of the announcement. But even if that took a while to dig up, who hit the sell button? Maybe once the panic started there was forced liquidation? I don't know but it doesnt make much sense. WNA should probably be 20 now, but it's not.

      And even if CFC-A/B had divs suspended, does that make them worth near 0, or only becase of some panic? They are not non-cum, so as long as Bank of America does ok, then the divs will come later. If it's true that BAC has assumed this debt for real, then the true value is not yet reflected here. I think there's no question that this is a debt issue, the question is does BAC guarantee the debt. After the CEO spoke those words during the last conference call, I don't see how they get out of it now.

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