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So I recently ran across the CABCO series of third party trust preferred issues which basically consists of a cocktail of SBC corporate 6.45% notes, now AT&T, along with with a swappable interest rate strategy. I was all excited until I ran across the RISKS section. I have to read it over in more detail this weekend as its very comprehensive.

My main concern was that initially I thought the only way this issue could be in trouble is if the underlying bond did not pay out. However after reading through some of this jargon in the prospectus, are there additional risks relating to how the interest rate swap mechanism plays out vs. what interest rates do??

Basically there is a formula for the coupon rate which consist of the 3-month LIBOR rates + 0.65%. BUT the minimum guaranteed payout is 3.25% and the maximum is 8.00%. So right now the annual yield is in the 3.75%ish range.

The ticker is GYC and is trading well under its $25 face value amount in the $22 range. Its redemption date is 6/15/2034. I thought now would be good time to buy some because interest rates are pretty much at their bottom.

Here is the prospectus. Any thoughts or input appreciated.

http://www.sec.gov/Archives/edgar/data/1310227/0000950123040...
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