communipaw wrote:I saw an ad for this today but have not looked at it closely: duke energy premier notes
http://www.duke-energy.com/investors/in ... stions.asp
Key risk factors to consider before investing include:
• An investment in the Notes does not create a bank account or depositor relationship between you
and Duke Energy or The Northern Trust Company, as the agent bank.
• The Notes are not equivalent to a deposit or other bank account and are not subject to the protection
of Federal Deposit Insurance Corporation (FDIC) regulation or insurance or any other insurance.
4• All of the money you invest will be used to purchase Notes for you. All interest earned on your
Notes will be reinvested monthly in additional Notes for your investment. The Notes are not a
money market fund, which is typically a diversified fund consisting of short-term debt of many
issuers. The Notes are not subject to regulation under the Investment Company Act of 1940, as
amended. Consequently, you will not have the benefit of federal laws and regulations designed to
help maintain liquidity and a stable share price and set standards for credit quality, diversification
and for maturity of individual securities and the overall portfolio.
• The Notes are not subject to the requirements of the Employee Retirement Income Security Act of
1974, as amended.
• The Notes are not a brokerage account with Georgeson Securities Corporation or any other brokerdealer and are not protected by the Securities Investor Protection Corporation under the Securities
Investor Protection Act of 1970.
• Duke Energy has not requested, and does not anticipate receiving, a rating for the Notes from any
• The interest rate paid on investments in the Notes may not provide a basis for comparison with
bank deposits or money market funds, which may use a different method of calculating yield, or
other investments which pay a fixed yield for a stated period of time. The interest rate also does not
necessarily bear any relation to the risks associated with or changes in our creditworthiness, credit
rating or financial condition and may not compensate you for any increase in credit risk of
investment in Notes.
• Although you may redeem your investment in the Notes at any time in whole or in part, in the
manner explained in this prospectus, you are not able to transfer your investment in the Notes to
someone else. The Notes are not listed on any securities exchange, and no secondary market for the
Notes currently exists nor will one develop in the future. Consequently, there is no public market
valuation of the Notes to assist you in evaluating the Notes or the yield earned.
• The Notes are unsecured debt obligations of Duke Energy Corporation. Only the assets of Duke
Energy Corporation are available to pay the principal and interest on the Notes.
• Duke Energy Corporation is a holding company, and we operate our businesses through our
subsidiaries. Thus, our ability to meet our obligations under the Notes is dependent on the earnings
and cash flows of those subsidiaries and the ability of those subsidiaries to pay dividends or to
advance or repay funds to Duke Energy. In addition, the rights that Duke Energy and its creditors
would have to participate in the assets of any such subsidiary upon the subsidiary’s liquidation or
recapitalization will be subject to the prior claims of the subsidiary’s creditors. Certain subsidiaries
of Duke Energy have incurred substantial amounts of debt in the operation and expansion of their
businesses, and Duke Energy anticipates that certain of its subsidiaries will do so in the future.
5• Holders of Notes will generally have a junior position to claims of creditors of our subsidiaries,
including trade creditors, debt holders, secured creditors, taxing authorities, guarantee holders and any
holders of preferred stock. In addition to trade debt, certain of our operating subsidiaries have ongoing
corporate debt programs used to finance their business activities. As of December 31, 2010, on a
consolidated basis (including securities due within one year), we had approximately $18.4 billion of
outstanding debt, of which approximately $15.1 billion was subsidiary debt. Approximately
$2.0 billion of such subsidiary debt was guaranteed by Duke Energy as of December 31, 2010.
• The Notes are not guaranteed, endorsed or insured by any of our subsidiaries or any financial
institution or government entity. Duke Energy does not maintain reserves for its obligations under
the Notes. There is a risk that Duke Energy will be unable to meet interest payments or repay
principal on the Notes. You may lose all or part of your investment, including accrued interest, if
Duke Energy is unable to pay its debts, enters bankruptcy or seeks protection from its creditors.
• You will not be able to exchange your Notes for any other securities of Duke Energy.
• Other risk factors we list in our annual reports on Form 10-K, quarterly reports on Form 10-Q and
other reports that are incorporated by reference into this prospectus.
tetractys wrote:Well I guess this is a private loan based on an honor system that can be liquidated. How much is the "floating" interest it pays? -- Tet
nisiprius wrote:The Prospectus says the notes
What does this mean? Does this mean that investors in the notes are treated equally with investors in Duke's corporate bonds? Or does it mean the bondholders have priority over holders of these notes?
- will rank equally and ratably with all other unsecured and non-subordinated indebtedness of Duke Energy, of which approximately $3.3 billion was outstanding at December 31, 2010
- are structurally subordinated to the indebtedness and other liabilities of Duke Energy’s subsidiaries. As of December 31, 2010, there were $15.1 billion of indebtedness and other liabilities of Duke Energy’s subsidiaries
Where do these notes fit in the hierarchy of bonds, preferred stock, common stock?
I notice Wikipedia says "subordinated debt (also known as subordinated loan, subordinated bond, subordinated debenture or junior debt) is debt which ranks after other debts should a company fall into liquidation or bankruptcy."
My impression is that they've taken a sophisticated financial instrument and packaged it up to look and feel like just like a familiar money market deposit account.
Thank you.huntertheory wrote:These are essentially corporate bonds....
...you can find the credit ratings for Duke Energy on their website, here (go figure):
http://www.duke-energy.com/investors/fi ... atings.asp
Consistent with what I said above, the operating subsidiaries carry higher credit ratings than the parent company, Duke Energy. BB+ and lower are considered junk bonds; BBB+, the rating for Duke Energy, is considered "investment grade," FWIW.
The upshot is that I think you picked a couple of points that aren't as negative as you are making them, at least if you consider these things corporate bonds which is what they look, smell, and taste like. But I will wholeheartedly agree with you here:And that is always a good reason to be wary.My impression is that they've taken a sophisticated financial instrument and packaged it up to look and feel like just like a familiar money market deposit account.
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