cm2 Posted July 11 Share Posted July 11 Why worry about T dividends when you can buy $KTBA (AT&T/ BellSouth, BBB) 7% '95 Trust Preferred: 8.80% Current Yield, 8.70% Yield to Maturity, 18% discount to $25 par value, sole underlying bond *BBB* BellSouth 7s '95 Cusip: 079867AP2 is trading ~$109 (PREMIUM). AT&T has previously tried to buy back entire issue, now 3rd parties are trying to steal them from retail https://tinyurl.com/3nt74ru4 https://tinyurl.com/ycxdac2x $KTBA pays .875 on 6/1, 12/1 Expert market (full service brokers only) or they would be trading *much* higher Link to comment Share on other sites More sharing options...
gfp Posted July 11 Share Posted July 11 (edited) Why is the "yield to maturity" lower than the "current yield" if it trades at a discount to par value? Maybe we should just pick one of the several threads you have started on this bond and reply there instead of making a new thread and copying and pasting the text from your old thread? Edited July 11 by gfp Link to comment Share on other sites More sharing options...
cm2 Posted July 12 Author Share Posted July 12 Did you do the math? Or do you think that asking math questions is a "contribution?" Happy to post fewer ideas in response to snarky responses of limited / no usefulness Link to comment Share on other sites More sharing options...
gfp Posted July 12 Share Posted July 12 29 minutes ago, cm2 said: Did you do the math? Or do you think that asking math questions is a "contribution?" Happy to post fewer ideas in response to snarky responses of limited / no usefulness Cheers! And thanks for posting your best idea. Link to comment Share on other sites More sharing options...
Malmqky Posted July 12 Share Posted July 12 I think it would be better to just post updates in this thread, that way discussion is consolidated. I have nothing really to add to this, but I like this idea, might move some of the parents funds into it. Thanks for sharing. Link to comment Share on other sites More sharing options...
cm2 Posted July 12 Author Share Posted July 12 (edited) Underlying bonds trading on a 6.40% ytm, that would place these trust prefs at $28 sure, deserves some discount for complexity but cmon Edited July 12 by cm2 Link to comment Share on other sites More sharing options...
gfp Posted July 12 Share Posted July 12 (edited) Seems like this trades at a large discount to the underlying bond because it is highly illiquid (is it correct that there is only $41m total outstanding?) and doesn't mature for over 70 years. Edited July 12 by gfp Link to comment Share on other sites More sharing options...
COBFInfinity Posted July 13 Share Posted July 13 8 hours ago, gfp said: Seems like this trades at a large discount to the underlying bond because it is highly illiquid (is it correct that there is only $41m total outstanding?) and doesn't mature for over 70 years. Not only is it illiquid in that a large portion of investors can't buy it at all, you also have no visibility of the bid/ask - but you can assume the spread is wide. So if you plan to buy this - again, assuming you even have an account that will allow you to - you had better plan to hold onto it for a while. P.S. Your "math question" was valid. Link to comment Share on other sites More sharing options...
bizaro86 Posted July 13 Share Posted July 13 4 hours ago, COBFInfinity said: Not only is it illiquid in that a large portion of investors can't buy it at all, you also have no visibility of the bid/ask - but you can assume the spread is wide. So if you plan to buy this - again, assuming you even have an account that will allow you to - you had better plan to hold onto it for a while. P.S. Your "math question" was valid. I can definitely buy this, and have considered it in the past, probably as a result of a previous thread. I'd also be interested in seeing the work on that current yield/YTM - of course, on something that doesn't mature for 71 years the current yield/YTM are probably very close, but I would expect the YTM to be slightly higher given the discount... Does anyone know how this would work if the underlying bonds get redeemed? I assume the money just gets returned to holders but that seems like that sort of thing that would be good to confirm. The other question I have is whether the underlying bond has redemption features in it. Normally that wouldn't be a benefit to this type of investment, but with the discount/low liquidity AT&T buying back the underlying at par at some point and getting cash out sooner would be a benefit, imo. Given the underlying bond trades at a premium it would obviously be to their advantage to do so, and it seems possible that long rates decline again making it even more advantageous in the future. If they can call the debt at $102 or something on a fixed date that makes it potentially a big win, which would make it more interesting for me. Link to comment Share on other sites More sharing options...
gfp Posted July 13 Share Posted July 13 The underlying bell south bonds are not callable by AT&T. Link to comment Share on other sites More sharing options...
ValueMaven Posted July 13 Share Posted July 13 This is actually a really stupid and illquid piece of paper. I'd much rather - and do own - the GS fix-to-floating 7.5% Capital Trust's issued a few months ago. $1,000 par, so you dont get idiot ETF holdings owning it, it's now trading at $103 - but you could have easily bought these at par a few months ago. $2.25B issue size and is very liquid. Link to comment Share on other sites More sharing options...
cm2 Posted July 18 Author Share Posted July 18 (edited) Block of 10,000 KTBA traded 21 today! Cheap! thats an 8.35% vs underlying bonds on 6.50% High Grade telecom vs Lehman Bros, er Goldman Sachs lol Duration can be a good friend in falling rate environment...or if you have long dated liabilities...non cumulative, junk holdco financial floaters...not so much Edited July 18 by cm2 Link to comment Share on other sites More sharing options...
debtvulture Posted July 22 Share Posted July 22 On 7/13/2024 at 8:35 AM, gfp said: The underlying bell south bonds are not callable by AT&T. If this was callable by the company that issued it, then I imagine that AT&T can call it also. The issuing subsidiary may still be around but if not I can't imagine that a callable bond all the sudden isn't callable because the issuer got bought. Link to comment Share on other sites More sharing options...
gfp Posted July 22 Share Posted July 22 Just now, debtvulture said: If this was callable by the company that issued it, then I imagine that AT&T can call it also. The issuing subsidiary may still be around but if not I can't imagine that a callable bond all the sudden isn't callable because the issuer got bought. That's not what I was saying. I was saying the bonds were never callable. Link to comment Share on other sites More sharing options...
debtvulture Posted July 22 Share Posted July 22 4 minutes ago, gfp said: That's not what I was saying. I was saying the bonds were never callable. Thank you for clearing that up quickly. Link to comment Share on other sites More sharing options...
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