Replies to post #2167 on Washington Mutual WAHUQ Trust Prf (fka WAHUQ)

[mrholty]

Thanks for your thoughts.

You are correct in that the senior bonds are price plus FJR.

The problem I have is that the Seniors should not dropped much since they presumably be made whole via the HUQ security. I would have expected HUQ to drop once it did, (and I fully take responsibility for not understanding that fully when I purchased in the 6s and 4s). However with HUQ dropping to the assumption that they will have to pay the Senior back due to the subordination clause why should the Senior's have dropped. Its almost as if Hundreds of millions of dollars disappeared in total.

One of these is wrong:
Either seniors gets paid in full via subordination clause via HUQ and it is underpriced and HUQ is screwed.
or
HUQ doesn't have to pay subordination and Seniors are fairly priced while HUQ is underpriced.

While part of the HUQ issue is each month hits them double that has historically shown up in a slow bleed in their stock.