Banks’ Bondholders May Be Next to Share Bailout Pain

Trust-preferred shares of Bank of America and Citigroup were trading at less than 30 cents on the dollar and yielding more than 25 percent because investors anticipate restructuring, said Tim Anderson, chief fixed-income officer at Riverfront Investment Group in Richmond, Virginia.

“The current prices imply that the companies’ equity is worthless, the government’s investment is worthless and subordinated debt holders will lose some of their investment,” said David Darst, an analyst at FTN Equity Capital Markets in Nashville, Tennessee.