{"id":1720,"date":"2008-01-21T21:50:49","date_gmt":"2008-01-22T01:50:49","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1720"},"modified":"2008-01-21T21:50:49","modified_gmt":"2008-01-22T01:50:49","slug":"ftupra-ripe-for-a-downgrade","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1720","title":{"rendered":"FTU.PR.A : Ripe for a Downgrade?"},"content":{"rendered":"

I’m not sure how long FTU.PR.A will be able to hang on to its Pfd-2 rating from DBRS<\/a>.<\/p>\n

As of January 15, Asset Coverage was 1.59:1, according to the company<\/a>. The S&P 500 Financials Price sub-index<\/a> was 360.73 on January 15; declining to 342.03 on January 18. Given the shock and horror<\/a> experienced since then, let’s just chop another 10% off that, just for fun to see what happens. This is by no means a crazy estimate for the value of this index at the close tomorrow, January 22 … and will mean a price level of 307.8.<\/p>\n

Such a drop would be a 14.7% decline in market value from the time of the last NAV for FTU.PR.A, which in turn implies a projected asset coverage of under 1.4:1. On the positive side (for the pref holders!) is the declaration in the prospectus<\/a>:<\/p>\n

\n

No dividends will be paid in any year on the Class A Shares so long as any dividends on the Preferred Shares are then in arrears or so long as the Net Asset Value per Unit is equal to or less than $15.00 (calculated as described under \u2018\u2018Details of the Offering \u2014 Valuation of Assets\u2019\u2019). Additionally, no special year-end dividends will be paid if after payment of such a special dividend the Net Asset Value per Unit (calculated as described under \u2018\u2018Details of the Offering \u2014 Valuation of Assets\u2019\u2019) would be less than $25.00.<\/p>\n<\/blockquote>\n

We shall see! I consider it somewhat astounding that the capital units, symbol FTU, closed at $5.97 today, above their January 15 asset value. I will admit that my rough valuation above does not consider differences between the underlying portfolio and the sub-index; ignores short calls that are now more likely to expire worthless; and takes a rather gloomy view of tomorrow’s market action …. but $5.97? Really?<\/p>\n

Update, 2008-01-22<\/strong>: Well – so much for market-timing! The emergency 75bp Fed cut to 3.50%<\/a> averted disaster, and the S&P500-Financials closed at 342.03 today.<\/p>\n

That’s down 5.18% from the January 15 level, which implies an estimated asset coverage of 1.51:1 … but that’s still looking a little fragile!<\/p>\n

Update, 2008-1-23<\/b>: S&P Financials closed at 373.33 today, which puts them up 3.49% from the January 15 level, which implies an estimated asset coverage of about 1.65:1. Remember this, next time I make a market prediction!\n<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

I’m not sure how long FTU.PR.A will be able to hang on to its Pfd-2 rating from DBRS. As of January 15, Asset Coverage was 1.59:1, according to the company. The S&P 500 Financials Price …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-1720","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1720"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1720\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}