Trust Preferred Securities (TruPS)

Trust preferred securities (TruPS) are a type of hybrid security that combines the features of a bond and a preferred stock. They are issued by banks and other financial institutions, and are typically rated below investment grade.

TruPS are often used by banks to raise capital in a time of financial stress. They are considered to be a safer investment than common stock, but they offer a lower yield than bonds.

TruPS are structured as a series of payments, with the first payment being made at the time of issuance. The remaining payments are made at regular intervals, typically quarterly or semi-annually. The payments are made in the form of interest and principal.

The interest payments on TruPS are typically fixed, but the principal payments can be either fixed or variable. The variable principal payments are based on the performance of the underlying assets.

TruPS are often used as a substitute for bank capital. They are considered to be a safer investment than common stock, but they offer a lower yield than bonds. This makes them a good option for investors who are looking for a safe investment with a moderate yield.

TruPS are also a good option for banks that are looking to raise capital in a time of financial stress. They are considered to be a safer investment than common stock, and they offer a higher yield than bonds. This makes them a good option for banks that are looking to raise capital at a lower cost.