Friday, September 25, 2009

Trust Certificates Links in One Post

Added 10/18/2011: I am no longer updating this post. Instead, I have written a new post on this topic:  Trust Certificates: New Gateway Post (Post Dated 9/23/11)

Another frequent topic of discussion in this blog is a unique way to own a bond, and to purchase them on a stock exchange rather than in the bond market. I call them Trust Certificates, sometimes abbreviated to just TCs. A Trust Certificate represents an undivided interest in the property of a trust that contains a bond from a single issuer, that bond is referred to as the underlying security of the Trust. The trustee collects the interest payments from the issuer and then disburses those funds to the owners of the Trust Certificates. Most Trust Certificates have a par value of $25 which makes them more affordable for an individual investor who may not want to buy a bond in the minimum unit of $1,000.

I give a general discussion of Trust Certificates in this post. Trust Certificate JZJ AT & T BOND It would also be helpful for anyone unfamiliar with this form of ownership to read a prospectus just to become acquainted with this type of security, before even trying to make a selection.

I currently own a large number of these securities. During the 4th quarter of 2008, they became seriously mispriced compared to the prices of the underlying security. On top of that, the underlying securities were frequently being seriously mispriced in the bond market in my opinion, particularly in October 2008, so it was like a discount to a discount in my view. Back then it was not unusual to pick up 3, 4 or even 5% more by buying the bond in Trust Certificate form than by buying the bond directly in the bond market, and corporate bonds were then trading at historically high premiums to comparable U.S. Treasuries. I have discussed some of the reasons behind this dysfunctional pricing which is less of an issue now. The prices for the individual bonds contained as the underlying securities in the Trust Certificates can be found at the FINRA web site, and I have started to collect links to the pertinent bonds in the following Gateway Post. LINKS TO FINRA INFORMATION ON UNDERLYING BONDS IN TRUST CERTIFICATES

THESE SECURITIES ARE GROUPED TOGETHER AT THE QUANTUMONLINE SITE UNDER THIRD PARTY TRUST SECURITIES. Third Party Trust Preferred Securities Table - QuantumOnline.com
AGAIN, I RECOMMEND BECOMING A MEMBER OF THIS FREE SITE.


In these posts I discuss many that I currently own and some of my trading activity in them:

AT & T: (AUGUST 2010-JZE AND GJF CALLED & JZJ PARTIALLY CALLED BY OWNER OF THEIR RESPECTIVE CALL WARRANTs)
FINRA Info Underlying Bond In JZJ FINRA
JZJ Prospectus: www.sec.gov
JZJ UNDERLYING BOND PROSPECTUS: www.sec.gov
GYC Prospectus: www.sec.gov
FINRA INFORMATION UNDERLYING BOND GYC FINRA
UNDERLYING BOND PROSPECTUS GYC Final Prospectus Supplement



AON
DKK Prospectus: www.sec.gov
KTN Prospectus: www.sec.gov
KVW Prospectus: 424B5
KVF Prospectus: 424B5
Underlying Bond Prospectus: www.sec.gov


DUKE (NOW SPECTRA ENERGY)
FINRA INFO ON UNDERLYING BOND: FINRA
JBI Prospectus: www.sec.gov
Prospectus for Underlying Security: www.sec.gov

CNA FINANCIAL
FINRA INFO ON UNDERLYING BOND: FINRA
JZV Prospectus: www.sec.gov

HERTZ


MACY'S
FINRA INFORMATION ON UNDERLYING BOND: FINRA
DKQ Prospectus: www.sec.gov
Underlying Bond Prospectus: www.sec.gov


VERIZON (XFL CALLED 3/24/2010 by Call Warrant owner)
FINRA INFORMATION ON UNDERLYING BOND: FINRA
PJL Prospectus www.sec.gov

PRUDENTIAL
BOUGHT 50 JZH AT 21 (POST FROM MAY 2010)
Sold 50 JZH at 24.45 (bought total cost 14.81 in 9/2008)
FINRA INFO UNDERLYING BOND: FINRA -
JZH Prospectus: www.sec.gov
Underlying Bond Prospectus: Prospectus Supplement

VALERO
PJZ Prospectus: www.sec.gov
Finra Information on Underlying Bond: FINRA
Underlying Bond Prospectus: www.sec.gov

GOODYEAR TIRE:
FINRA INFO ON UNDERLYING BOND: FINRA
XKK PROSPECTUS: www.sec.gov
Underlying Bond Prospectus: www.sec.gov

FIRST AMERICAN:
FINRA INFORMATION UNDERLYING BOND: FINRA
PJS PROSPECTUS: www.sec.gov
Prospectus for Underlying BOND: www.sec.gov

J P MORGAN


GOLDMAN SACHS:
Item # 4: JBK
FINRA INFO ON 2033 SENIOR BOND: FINRA JZS PYB PJI DKP DKW HJG GJS
UNDERLYING BOND PROSPECTUS FOR GS 2033 SENIOR: www.sec.gov
FINRA INFO ON 2034 GS TP FINRA GYA GYB JBK PYC PYY PYK PYT HJJ HJL HJN
UNDERLYING BOND PROSPECTUS 2034 GS TP: www.sec.gov
PJI PROSPECTUS: www.sec.gov (2033 SENIOR BOND)
GYB PROSPECTUS: www.sec.gov (SYNTHETIC FLOATER)
JBK PROSPECTUS: www.sec.gov (2034 TP)
PYT Prospectus: www.sec.gov (SYNTHETIC FLOATER)
JZS Prospectus: www.sec.gov (2033 SENIOR BOND)
PYB PROSPECTUS: www.sec.gov (2033 SENIOR BOND)
DKW PROSPECTUS www.sec.gov (2033 SENIOR BOND)

PROCTOR & GAMBLE:
Prospectus for Underlying Bond in the TC: Final Prospectus Supplement
TC Prospectus: www.sec.gov
FINRA INFO UNDERLYING BOND: FINRA -

ALLSTATE:
TC Prospectus for GJT: www.sec.gov
Underlying Bond Prospectus: www.sec.gov
FINRA INFO UNDERLYING BOND: FINRA -

DOMINION RESOURCES:
TC PROSPECTUS: www.sec.gov
UNDERLYING BOND PROSPECTUS: FORM 424B5

CREDIT SUISSE

FIRST UNION (ACQUIRED BY WELLS FARGO)

BANK OF AMERICA:
MJH PROSPECTUS: www.sec.gov

Countrywide (now Part of Bank of America)
CPP PROSPECTUS: www.sec.gov

EMBARQ: (ACQUIRED by CTL)
TC PROSPECTUS: www.sec.gov
UNDERLYING BOND PROSPECTUS: Form 424(b)(4)


WAL- MART:


DPL
UNDERLYING BOND PROSPECTUS: www.sec.gov
MJV PROSPECTUS: www.sec.gov
MJT PROSPECTUS: www.sec.gov
LINK TO FINRA INFORMATION ON UNDERLYING BOND: FINRA

AFC CAPITAL (guaranteed by Hanover Insurance)
KRH PROSPECTUS: www.sec.gov
PKM PROSPECTUS: www.sec.gov
FINRA INFORMATION UNDERLYING BOND: FINRA

LIBERTY MEDIA
FINRA Information on Underlying Bond in PIS PYL PYA: FINRA
FINRA Information on Underlying Bond in PKK: FINRA
PKK Prospectus: www.sec.gov
PIS: Prospectus: www.sec.gov

Daimler AG:


Unum:
PJR Prospectus: www.sec.gov
FINRA Link Underlying Bond in PJR: FINRA
KSA Prospectus: www.sec.gov
FINRA Info Underlying Bond in KSA: FINRA

TIME WARNER:
PYI Prospectus: www.sec.gov

IPB: A TC CONTAINING 15 CORPORATE BONDS AND TREASURY STRIPS
IPB Prospectus: www.sec.gov

Limited Brands:
PZB PROSPECTUS: www.sec.gov
UNDERLYING BOND PROSPECTUS: www.sec.gov

Burlington Northern Santa Fe: (DELISTED after Berkshire acquisition)

Qwest:
PJA PROSPECTUS: www.sec.gov
UNDERLYING BOND PROSPECTUS: www.sec.gov

Goodrich:
DKF PROSPECTUS: www.sec.gov
UNDERLYING BOND PROSPECTUS: www.sec.gov

Sprint:
FINRA Information Underlying Bond for GJD and DHM: FINRA (2028 Sprint Capital)
FINRA Information Underlying Bond for DKI: FINRA (2032 Sprint Capital)
Underlying Bond Prospectus for Sprint Capital 2028: www.sec.gov
Underlying Bond Prospectus for Sprint Capital 2032: www.sec.gov
GJD Prospectus: www.sec.gov
DHM Prospectus: Prospectus Supplement
DKI Prospectus: www.sec.gov

R R Donnelley
PYS Prospectus: www.sec.gov
Underlying Bond Prospectus: www.sec.gov

XEROX
KTX Prospectus: www.sec.gov
Underlying Bond Prospectus: www.sec.gov

MOTOROLA
FINRA INFO UNDERLYING BOND XFJ: FINRA
XFJ PROSPECTUS: www.sec.gov
UNDERLYING BOND PROSPECTUS: /www.sec.gov


GENERAL DISCUSSIONS:

It is important to understand how the call warrants contained in the prospectuses will impact the price of the TC and its redemption, when the underlying bond in the TC is selling at a premium to its par value.

The Trust Certificates can only be understood by reading the prospectuses and doing your homework. In these posts, I explained how I decide to buy one, and the various factors that enter into the decision making process. Some Certificates contain senior bonds, others have junior bonds, some are floaters, some of the underlying bonds are rated junk and others are investment grade with some higher quality names like AT & T and Verizon. Each one has to be considered on its own merits.

I may leave some that I currently own out, but I believe my current positions are JZE, JZJ, JZH, JZV, DKR, DKQ, KTN, KVW, DKK, PJL, XFL, PJS, KTV, MJH, KCC, XKK, DKF, PIS, PKK AND PROBABLY MORE INCLUDING THE SYNTHETIC FLOATERS WHICH ARE ALSO IN TC OWNERSHIP FORM. Links to Discussions on Floaters in One Post

I am an opportunistic buyer of these securities, so most of them are currently priced at levels that have little or no interest to me. Many are currently classified as long term holds as part of my bond allocation.

THIS IS ALSO A FRUITFUL AREA FOR A TRADING STRATEGY CALLED FUNCTIONAL EQUIVALENCE, UNTIL I STARTED TALKING ABOUT THAT TRADE.

I WILL JUST ADD TO THIS POST WHEN I FIND ADDITIONAL RELEVANT LINKS TO ITS SUBJECT MATTER.


These are links to what I view as important information about these investments, risk management in bonds, inflation and credit risks and bonds in general:



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