Skip to main content
No. of Recommendations: 1
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.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.