<darkness39[at]yahoo.com> wrote in message
news:1172940426.115693.197830[at]p10g2000cwp.googlegroups.com...
- quote -

Preference shares (I belive more commonly called preferred stock in the US)
are themselves hybrids. They fall on one extreme of the spectrum (the most
equity-like, the least bond-like), while optionally convertible bonds fall
on the other extreme of the spectrum.

Here's an article from A.M. Best on how they rate companies that issue
hybrids. http://www.ambest.com/ratings/method...securities.pdf It
says that "Traditional preferred stock [is] generally viewed as the original
form of a hybrid security." The doc has a simple table showing its
equity/debut continuum.

Here's another site, that has a table giving Fitch's spectrum of hybrids:
http://www.nationalunderwriter.com/a...securities.asp

While preferred stock does rank behind debt in servicing, I believe you can
have hybrids that are not subordinated to other (unsecured) debt. A classic
example should be senior convertible notes - the convertibility gives them
equity characteristics. (It's easy to find SEC filings declaring that these
are hybrids, but we know that just because someone puts a label on something
doesn't make that correct - I haven't found anything I consider
authoritative on this point.)

For Tad, here's a 10 page article on hybrids from MoFo. (It also contains
Moody's spectrum of equity/debt). It has a section that walks you through
the attributes of a specific enhanced trust preferred security (and gives
you a clue what "indirect obligation" means).
http://www.mofo.com/practice/docs/WSL10.pdf

Mark Freeland
BnetOnewsX[at]sbcglobal.net

On Mar 3, 1:45 pm, "TB" <Tom.Bec...[at]Verizon.net> wrote:
- quote -

They are used by companies as a form of debt, that rating agencies
recognise as a form of equity. This is particularly useful for banks
(who can therefore report higher capital, and so make more loans).

http://www.cfo.com/article.cfm/52458...Finance_Inside

The credit risk should be the risk of the issuer, ranking *behind* all
the other bank lending and debt securities of that issuer, but ahead
of any preference shares or common stock (I'm talking through my hat
on this point, i haven't researched it).

Investopedia.com gives the following definition for "hybrid
security," the category into which hybrid preferreds falls:
"A security that combines two or more different financial
instruments. Hybrid securities generally combine both debt
and equity characteristics. The most common example is a
convertible bond that has features of an ordinary bond, but
is heavily influenced by the price movements of the stock
into which it is convertible."

I found the following also helpful on this subject:

Go to www.quantumonline.com .
Near the top, click on "Information."
Click on "Income Investments," and read.

For info on ETRUPS etc. in particular via quantumonline,
you'll have to register (free) and log in. I have not had
any problems with spam from this site. I used a phony name
for registration. Once registered, click on "Income Lists."
Scroll down to the paragraph describing "Trust Preferred
Securities." Also, click on the "Trust Preferred Securities"
list. This should help with some of your questions below.

Can someone explain in clear terms what hybrid preferred
securities are? I
understand bonds and preferred stocks - but what exactly are hybrids?
If they are backed
by bonds who bought and holds the bonds? An example is:

Issuer Name: Citigroup Capital XVII Enhanced Trust Preferred Security
(ETRUPS)
Issuer Description: This cumulative deferrable hybrid security is an
indirect obligation of Citigroup Inc. Citigroup Inc. is a diversified
financial services holding company that provides a broad range of
financial services to consumers and corporate customers around the
world.
Type Of Bond/Security: Hybrid Preferred Security