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URL:  https://boards.fool.com/union-carbide-bonds-27419872.aspx

Subject:  Union Carbide Bonds Date:  2/7/2009  1:06 PM
Author:  schurchill16 Number:  25894 of 36834

I was doing a quick screen of bonds available for purchase through my Scottrade account. I was filtering through and Union Carbide caught my eye as it is yielding 12.93%. It is a wholly-owned subsidiary of Dow and when i cross checked it versus quantum online's list of related securities for Dow I found two structured assets KVT & DKM which are yielding 7.79% and 7.31%.

This strikes me as odd. I'm no expert on Dow, but a quick search shows that Union Carbide sells almost exclusively to Dow.

I can understand a slight premium to the Dow assets as they are tradeable in smaller blocks of value and they are directly linked to the parent company vs. a subsidiary.

My assumption is that the second piece of the puzzle => the parent company vs. subsidiary really only comes into play if Dow spins off Union Carbide. I am thinking that this assumption must be missing something. Is it a plausible risk that Dow would stop paying the union carbide bond significantly before they would stop paying on their dow debt ? As I type I realize that the other possible answer is that during a bankruptcy Union Carbide Debt may only have a claim to Union Carbide assets... But I would think that if bankruptcy were close enough to a real possibility, that the Dow debt wouldn't be trading at such a low yield.

Am I missing something? Looking forward to any insight whether specific to these issues or theories in general.

Scott
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