Wednesday, June 4, 2014

MBC Ends Its Final Annual Period with about a 13.03% Coupon Payment on a $10 Par Value

As previously noted, the "principal protected" senior unsecured note MBC ended its final annual coupon period on 6/2/2014. The final interest payment and the $10 par value will be paid by Citigroup Funding on 6/9/2014: Final Pricing Supplement

This note's coupon was tied to the percentage performance of the Russell 2000 index. The annual coupon was the greater of 3% or up to 30%, depending on the percentage gain of that stock index, on a $10 par value. I am leaving out some important details in that description since they no longer matter. 

Starting Value-Russell 2000 Closing Price on 5/21/13: 998.78
End Value of Russell 2000 on 6/2/14: 1,128.9
Gain=130.12 points
Percentage Gain Over Starting Value=13.03% (rounded)

The final interest coupon will be the percentage gain of about 13.03% ($130.3 per 100 shares).

I am not sure of the ex interest date. The shares last traded at $11.28 on 6/4/14 (12:29 P.M. EST), slightly below the combined amount of the $10 par value per share and the $1.3 final coupon payment per share. I have no idea why anyone is selling now. 

I will post a snapshot of the par value and coupon payments in the first weekly post after receipt (i.e. 6/14/14)

I will realize a small profit on the shares in addition to the interest payments. 

In the last coupon period, MBC was down to the wire whether I would receive close to 30% or the minimum 3%, MBC Down to the Wire, but there was a Maximum Level Violation just three days before the End Date that caused a reversion to the minimum 3% coupon which caused our RB to say "pooh on that". MBC-Maximum Level Violation (5/20/13 Post) 

MOU, which was also tied to the Russell, proved to be much better: (e.g. Received MOU Redemption Proceeds This Afternoon-28.4% Annual Coupon Confirmed)

Now, I have the common problem which has existed for some time now. What do I buy with the proceeds of a bond redemption? 

I have a bid to buy 100 shares of a leveraged bond CEF that is yielding around 8.45%. I am ambivalent about whether the order is filled at my below market price limit order. There is a lot of risk today when reaching for that kind of yield.  

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