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Author: aacarter Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35379  
Subject: Fortis 23% bond Date: 8/25/2007 1:31 PM
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Hi Everyone,

I bought a Fortis Bank bond (rated aa2) six month 20.25 rate monthly (23% yield.)

These are now gone but a 16.5% and 11.5% are still available.

It showed up on OptionsXpress normal Bond screener.

What's the catch? Am I toast?

Fortis Bank seems to be part of a pretty awesome family.

Thanks,

Andy
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Author: blacktreechaser Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21393 of 35379
Subject: Re: Fortis 23% bond Date: 8/25/2007 6:30 PM
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I hope it goes well for you, but that yield is way out of wack with the rest of the world...have they defaulted on the last few payments? Have they announced that they may have trouble making future payments? If it sounds too good to be true, it usually is.

I know nothing about Fortis and have not looked anything up. Maybe you'll do well (I got a nice double once on Wendys convertible bonds plus a nice rate of return...so anything is possible).

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Author: LostCommuniques Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21443 of 35379
Subject: Re: Fortis 23% bond Date: 8/30/2007 4:32 PM
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You bought a reverse convertible security, which is a form of arbitrage Fortis is engagin in. It is a combination of a bond and a put. They will invest the principal for the term of the bond. If the investment is successful, they will return the principal to you at maturity. If not, they will pass the investment on to you - now at a lesser value than the principal you staked. You should find out what the underlying investment is. A 23% yield implies a lot of risk, so chances are you'll end up with the underlying investment. If it does well, you can try to sell the bond before maturity. You could make a profit. But you need to know what their reference price is, not just the open market price.
Obviously Fortis thinks the underlying investment is worthwhile or they wouldn't issue the bond, but they have the option of giving you the investment instead based on whatever trigger points they laid out in the prospectus (usually a percentage of the investments price at issuance).

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Author: LostCommuniques Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21444 of 35379
Subject: Re: Fortis 23% bond Date: 8/30/2007 4:33 PM
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You bought a reverse convertible security, which is a form of arbitrage Fortis is engaging in. It is a combination of a bond and a put. They will invest the principal for the term of the bond. If the investment is successful, they will return the principal to you at maturity. If not, they will pass the investment on to you - now at a lesser value than the principal you staked. You should find out what the underlying investment is. A 23% yield implies a lot of risk, so chances are you'll end up with the underlying investment. If it does well, you can try to sell the bond before maturity. You could make a profit. But you need to know what their reference price is, not just the open market price.
Obviously Fortis thinks the underlying investment is worthwhile or they wouldn't issue the bond, but they have the option of giving you the investment instead based on whatever trigger points they laid out in the prospectus (usually a percentage of the investments price at issuance).

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21445 of 35379
Subject: Re: Fortis 23% bond Date: 8/30/2007 7:41 PM
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LostComminiques (shouldn't that now be lost podcasts), welcome to the board.

It looks like you actually know something about this stuff, which means you can be a very important additiion the board. (Some of us get stuck figuring out where to get the best CD).

Serious, I don't we've had a read expert on high risk stuff since our friend Charlie left a year and a half ago.

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Author: theHedgehog Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21446 of 35379
Subject: Re: Fortis 23% bond Date: 8/30/2007 7:47 PM
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Obviously Fortis thinks the underlying investment is worthwhile or they wouldn't issue the bond

I don't understand why this is obvious. Sure, it's probably worthwhile to Fortis, but why is it "obviously" worthwhile to the investor? Fortis doesn't seem to lose either way. The investor, OTOH...

Hedge

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Author: LostCommuniques Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 21453 of 35379
Subject: Re: Fortis 23% bond Date: 8/31/2007 3:31 PM
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You've overlooked the interest payment. While they may not lose on the principal either way, they have paid pretty handily for access to that principal. Fortis is paying a 23% yield for the capital to make this investment. That is a pretty significant stake.

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