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Countrywide Capital V (New) 7.0 Message Board

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  • joel_corley joel_corley Mar 2, 2009 1:05 PM Flag

    People Need to Read Preferred Prospectus More Carefully


    For senior unsecured debt, I see issues show a YTM anywhere from less than 6% to 13.7%. The YTM varies a lot and doesn't seem to show any sane transition between near-term and long-term maturities.

    I pulled those numbers from TD Ameritrade's online bond desk; but I also like to see what Fidelity is showing as well. Fidelity seems to be listing some BAC debt in excess of 14% YTM.

    Right now, CFC-PB is showing a simple effective yield of > 22%.

    - Joel

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    • correct, but CFC-PB is 'preferred', not 'debt'

      After all common dividends are ended, the boards of directors will end traditional preferred divies and then 'trust preferred' divies as things get worse and worse.

      • 2 Replies to wheelbarrowme
      • wheelbarrow,

        Actually, CFC-PB is a preferred share in a trust that holds unsecured junior subordinate debentures owed by Bank of America. The trust is a wholly owned subsidiary of Bank of America; but fundamentally you're investing in a partial share of a debenture (bond) owed by BAC. In fact, that's why the tax treatment for trust-preferred dividends is different from regular corporate preferreds - it's because you're effectively investing in a bond.

        And that's why it is reasonable to compare the yields to other bond issues from the same issuer. Of course you need to adjust for the additional risk involved, given the debt's inferior security position. In this case, it's reasonable for CFC-PB to have a yield in excess of the 14% currently offered by some after-market senior unsecured BAC debt.

        But I still think that 22+% is a bit excessive, given that I think that default is still somewhat remote.

        - Joel

      • LOL !!!!!! You idiot .

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