Re: Trust PFD default? - FJA
The trust was terminated because Embarq ceased to be a reporting company and that required termination of the trust- see below. The call holder elected NOT to exercise the call option necessitating the distribution of the trust assets.
I owned this and managed to contact someone at BAC/ML[it was a ML product] that was involved in the trust termination. FJA had a 7.1% coupon while the underlying bond coupon was 7.995%. The reduction in principal we received was, in part, to equalize the total yield we receive based on yield to maturity since the bonds we received have higher yield than FJA. There may not have been enough bonds to distribute to both classes and I think, emphasize think, that is why we received that chunk of cash. I know of no other explanation for the cash which was in an amount well beyond fractional bond issues.
I haven't done the math but we should make up the capital hit over time. The bonds we received are not callable and yield more. Also, they currently trade at about a 6% premium to par, not including accrued interest. It has traded as much as a 10% premium to par. FJA never traded at such a high premium and when sold we didn't get accrued interest. My understanding is that the bonds were distributed based on par value rather than market value so we come out a bit ahead there because of the relative premiums.
So we took a short term capital hit in exchange for a non-callable bond paying nearly 8% thru 2036. We also no longer have call risk and, for those holding in a taxable acc't, no unwanted LTCG's exposure anytime soon.
I'd love for some one mathematically inclined to figure out the break even point. I wasn't that motivated. :-)
Section 8 Other Events
Item 8.01 Other Events
On February 28, 2013 The Bank of New York Mellon, as Trustee for the PPLUS Trust Series EQ-1 Trust (the “Trust”), issued a press release regarding the receipt of a notice from the Depositor that the Depositor recently determined that the Underlying Securities Issuer of Concentrated Underlying Securities, Embarq Corporation ceased to be a reporting company under the Exchange Act in 2009. A Form 15 “Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act of 1934 or Suspension of Duty to File Reports Under Section 13 and 15(d) of the Securities Exchange Act of 1934” was filed for Embarq Corporation, the Underlying Securities Issuer in connection with the PPLUS Trust Certificates Series EQ-1 trust, on July 13, 2009. This requires termination of the trust. A copy of the press release is attached as Exhibit 99.1 hereto.
EX-99.1 2 ppluseq18-knewex991_0228.htm
Notice of Underlying Securities Issuer of Concentrated Underlying Securities Ceasing to be a Reporting Company and the Subsequent Trust Termination to the Certificateholders for PPLUS Trust Certificates Series EQ-1 (Class A CUSIP No. 73941X528; Class B CUSIP No. 73941X536) *
NEW YORK, February 28, 2013 /PRNewswire/ -- NOTICE IS HEREBY GIVEN that, pursuant to the terms of the Series Supplement dated June 14, 2007 which incorporates the terms of the Standard Terms for Trust Agreements, dated as of May 29, 2007 (the “Standard Terms” and, together with this Supplement, the “Trust Agreement”), between Merrill Lynch Depositor, Inc., as Depositor (the “Depositor”) and The Bank of New York Mellon, as Trustee (the “Trustee”), the Trustee has received notice from the Depositor that the Depositor has recently determined that the Underlying Securities Issuer of Concentrated Underlying Securities, Embarq Corporation, is no longer a reporting company under the Exchange Act, and that the trust must therefore terminate. Holders should surrender their Class A Certificates or Class B Certificates, as the case may be, to the Trustee, or deliver security or indemnity acceptable to the Trustee, for their respective pro rata distributions of Trust Property pursuant to the Trust Agreement.
Under the terms of the Trust Agreement, the Call Warrant Holder may choose to exercise the Call Warrants within 10 days after this notice. If the Call Warrants are exercised, holders of Class A and Class B Certificates will receive cash proceeds of such exercise to the extent available. If the Call Warrants are not exercised, the holders of Class A and Class B Certificates will receive Underlying Securities in kind, subject to appropriate minimum denominations of the Underlying Securities.
Beneficial owners of the Certificates will receive distributions through the facilities of The Depository Trust Company (“DTC”) and the intermediaries through which they hold their Certificates. DTC will present its Certificates to the Trustee in accordance with the procedures specified by DTC and the Trustee. Beneficial owners of Certificates should inquire with the intermediary holding their Certificates as to procedures for presentation and final payment and should provide instructions in writing with respect to the final distribution to their intermediary.
It is expected that the final distribution on the Certificates will be available within 15 days.
Withholding of 28% of gross redemption proceeds of any payment made within the United States may be required by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act"), unless the Trustee has the correct taxpayer identification number (social security or employer identification number) or exemption certificate of the payee.
Certificateholders who have questions or wish to discuss this notice may contact The Bank of New York Mellon, 101 Barclay Street, New York, New York 10286, Bondholder Relations (800) 254-2826.
*The CUSIP number listed above is for information purposes only. Neither the Trustee nor the Depositor shall be responsible for the selection or use of this CUSIP number, nor is any representation made to its correctness on the securities or as indicated in any exercise notice.
|
