In full disclosure, I own shares of JBI and will continue to buy additional shares at or below the current price OF 17 OR SO. This is not a recommendation to buy or to sell. Trade at your own risk, and perform research about this security by reading the prospectus at sec.gov and further studying the financial health of SPECTRA ENERGY (symbol SE at yahoo finance) before making any investment. Consult with your financial advisor prior to making any purchase. In this blog, I am merely describing my reasons for purchasing this security and the potential pitfalls that I identified prior to purchase. This security may not be suitable for others based on their unique financial position and risk profile. THE PROSPECTUS ON THIS TC CAN BE FOUND AT SEC.GOV http://www.sec.gov/edgar/searchedgar/webusers.htm
Friday, October 10, 2008
TRUST CERTIFICATES JBI DUKE
This discussion will assume familiarity with the lengthy discussion about Trust Certificates (TC) contained in the blog about JZJ, one of my first, and other blogs on this subject.
I own the TC discussed in this blog and am comfortable holding it even now but others may disagree after doing their research.
JBI is a TC containing a SENIOR bond of Duke Capital that matures on 2/15/2032. The coupon on the TC is 7.875% paid semi-annually in February and August. It has a $25 par value. The underlying bonds are callable now and were issued in February 2002 (check Spectra Energy at the SEC, filing made 2/14/2002) . The new name for Duke Capital is Spectra Energy (SE), a pipeline company that was recently spun out from Duke Energy (DUK).
This security traded down to 17 this morning, and hit 16 briefly a day or so ago, and is currently around 17.25. At a $16 price, the current effective yield would be 12.25% and another $900 on a 100 share purchase at 16 at maturity assuming payment of course. At a price of 17, the yield falls about a 1%.
I do the best that I can finding the CUSIP # for the underlying bond to see how it is trading in the bond market. I believe it is 26439rak2. I believe it is rated BAA1 by Moody's and BBB by S & P. I was only able to find a few small trades on 10/1 at around 82 or a 18% discount to par. The underlying bond has a coupon of 6.75% lower than the 7.875% coupon of the TC. At 17 the TC is trading at a 32% discount to its par value.
This TC is a Lehman ABS originated Trust. This is not relevant. The TC represents an interest in a senior debt obligation of Duke Capital, now Spectra Energy, held by a bank trustee.