JPMorgan To Redeem $1.7B Worth Of Subordinated Notes - Analyst Blog

JPMorgan Chase & Co. (JPM) is planning to redeem callable subordinated notes worth nearly $1.7 billion. The following series of fixed/floating rate subordinated notes will be redeemed:

  • The XS0246053531 series worth $438 million to be redeemed on Oct 31, 2014.
  • The 46625H CY4 series worth $287.5 million to be redeemed on Oct 31, 2014.
  • The XS0205436040 series worth €750 million to be redeemed on Nov 12, 2014.

JPMorgan stated that the total amount, to be paid on redemption, includes the entire principal amount of the notes, plus accrued and unpaid interest thereof (excluding the redemption date). The holders of each series of notes will get the redemption notices, which the company will send out through the relevant clearing systems within the notice periods.

Further, to receive the payment, the holder of these notes will have to submit them at the offices of The Bank of New York Mellon Corp. (BK). Also, JPMorgan anticipates that these redemptions will not affect its earnings.

Nonetheless, interest expenses, which reflected a fall of 12.7% in the first half of 2014, will surely register an additional decline in the upcoming quarters, once the redemption is completed. This in turn will somewhat ease pressure on top line.

While the presence of subordinated debt in the capital structure compels a company to remain vigilant, too much of such debt can prove to be critical for the company’s overall health as was witnessed in the financial crisis of 2008 after which the Federal Reserve exerted stricter rules in the form of Basel III requirements.

Currently, JPMorgan holds a Zacks Rank #2 (Buy). Some better-ranked finance stocks include Sierra Bancorp (BSRR) and Farmers Capital Bank Corp. (FFKT). Both these stocks sport a Zacks Rank #1 (Strong Buy).

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