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Subject:  Re: FBF.Pr.M what to do? Date:  3/3/2011  1:25 AM
Author:  aj485 Number:  32390 of 36785

Coupon 7.20% past call date, currently selling above par.

I bought last year at a nice discount, planning to hold until it got called. Since it is a TRU-PS it will almost certainly be called in 2012. The idea was to buy it for the YTC, 9% built-in capgain (due to the discount) plus $0.45/quarter dividend.

I don't think that your assumption that FBF-M will 'almost certainly be called in 2012' is all that certain. Trust Preferreds for large banks already have had 'regulatory events' occur with the passage of Dodd-Frank, the passage of the Collins amendment, and the actual signing of the bill. They will continue to have 'regulatory events' occur as the provisions of Dodd-Frank take effect, so 2012 isn't a 'watershed' that banks are waiting for to call Trust Preferreds. They are waiting until they have enough capital that they can divert some to debt payoff. That makes it even more likely that BAC's Trust Preferreds will be called in coupon rate order, highest to lowest, as capital becomes available to pay back debt, with little or no regard to the call dates.

The question is, for this particular issue, when will BAC have enough of a 'fortress balance sheet' (as the CEO is aiming for ) to begin buying back Trust Preferreds, in addition to paying a dividend? Given the bad news that keeps coming out about legal costs for mortgage issues it may be some time before BAC has enough capital to have a 'fortress balance sheet', divert earnings to a dividend rather than capital increase, and pay off all the debt with higher coupons before it gets to FBF-M. Even given the revenue that BAC has the potential to create, if the economy stays on a positive track, 2012 seems optimistic to me, given all the other expensive issues that continue to occur.

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