I own quite a few MXUPA and am a bit worried. Yes, Brookfield is...

I own quite a few MXUPA and am a bit worried. Yes, Brookfield is in a very strong capital position. However, when you read the original MXUPA prospectus, directors can withhold interest payments and indeed principal if the local entity gets into financial trouble. However, if the local entity can afford to pay the interest coupon payments, I think it would be quite possible to bring a case against the directors. In short, I think reputational damagge to Brookfield might be significant if they did not pay MXUPA coupon payments and, short of a formal parent company guarantee, this is what probably makes me hold them.

Based on a price of 51 for MXUPA, I reckon the equivalent rate of return is 118% per annum. So the market thinks they will step up in April 2010. But if you assume redemption is delayed to October 2011, the annualised return drops to around 57% per annum. Taking it to ridiculous extremes, redemption in Jul 2015 results in annulaised return around 41% per annum. (I use 6% NPV factor);

So, yes, MXUPA seems extremely undervalued and i guess I take some comfort from the fact that daily volumes are very low (given debt issue size was $400 million);