Friday, January 28, 2011

Call Warrant Exercised on MJT and MJV

I own two trust certificates, MJT and MJV, that contain as their underlying security the same TP, in effect a junior bond from the electric utility DPL.  Bought 100 MJV at $24.8 (Oct. 2009).  MJV has a 8% coupon.  MJT's coupon is 7.75%.  So both of these TCs provide a good income stream for me.  

The trustee has received notice that the owner of the call warrants attached to those TCs intends to redeem them at par value plus accrued interest on 2/22/2011.  Both of these TCs pay interest on a semi-annual basis and last went ex interest on 8/11/2010.   If the call warrant owner makes that payment to the trustee, then it can take possession of the securities owned by the trust.  I have lost a good number of bonds this way, as the Fed's Jihad against savers and responsible Americans moves toward its 4th year. 

The notices contain the following statement that will be found in any of these notices:  "Under the terms of the Call Options, the exercise of the Call Options may be rescinded prior to the Intended Settlement Date, in which case settlement of the relevant Call Options would not occur and the Call Options would continue in effect and could be exercised on a subsequent date. If settlement of the Call Options occurs pursuant to the notice of exercise on the Intended Settlement Date, then Class A Unitholders will receive the par value plus accrued interest of each Class A Unit . . ." 



The notices are also available at the SEC's web site: MJT  MJV

Both of these TCs were Morgan Stanley originations.  I would assume that MS owns the call warrants attached to all of the TCs originated by it.   And, if that is true,  MS has been very active in exercising those warrants to make a few quick and risk free millions.  

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