The owner of the call warrant has exercised its right to redeem JZE in full. Conditional Full Redemption of Corporate Backed Trust Certificates, AT&T Note-Backed Series 2004-2 Trust 2,000,000 $25 Par ($50,000,000 Certificate Principal Amount) Class A-1 Certificates due November 15, 2031 CUSIP No. 21988K297 (NYSE: JZE). The redemption date will be 8/12/2010. The owners of JZE will receive par value of $25 plus accrued interest of $.3625 per share. I bought JZE at $12.5 during the Dark Period. Some Nibbles Got Filled: JZE at 12.5 , PJS, INZ and FAX I would have preferred to keep it until maturity.
The owner of the call warrant has exercised its right to redeem JZJ. However, the call warrant holder has elected to do only a partial redemption of JZJ at this time. Conditional Partial Redemption of Corporate Backed Trust Certificates, AT&T Note-Backed Series 2003-18 Trust 1,600,000 $25 Par ($40,000,000 Certificate Principal Amount) Class A-1 Certificates due November 15, 2031 CUSIP No. 21988K503 (NYSE: JZJ) According to this release, 640,000 certificates will be redeemed at the $25 par value plus accrued interest of $.38515625 per certificate. This will leave 960,000 of the Class A-1 Certificates outstanding. While there is no guarantee, I suspect that the call warrant owner will redeem the remaining shares at a later time.
In a post from last Friday, I noted that it would make sense for the call warrant owner to redeem JZJ and JZE. Item # 7 Added 50 JZJ at 24.75 By redeeming those trust certificates, the call warrant owner acquires the underlying bonds and can sell those bonds at a significant profit with no risk. The underlying AT & T bonds closed yesterday at a 28% premium to its par value. FINRA It would not surprise me to learn that buyers for the bonds had already been lined up, which makes explain why there was not yet a full redemption of JZJ. If that has in fact occurred, the entire transaction would carry no risk and a guaranteed profit for the call warrant owner.
I currently own 200 JZJ with the first 150 shares bought at an average cost of $17.97 including commissions. Added to Long Bond Positions: Bought JZJ at 17.5 There is no reason for me to do anything in response to this call except to allow it to happen. The problem is finding another suitable bond investment now to buy with the proceeds.
(see More on the Call Warrant in TCs & Call Warrants and Trust Certificates for a discussion of the call warrant provision and how this will impact the price of a TC when the underlying bond is trading at a premium to its par value)