CIMB Bank Bhd has issued the first four Callable Bull Certificates (CBLC) in the country, on AirAsia Bhd, Gamuda Bhd, Genting Bhd and Berjaya Corp Bhd. A CBLC is quite similar to a call warrant ('CW'), except for a Mandatory Call Event ('MCE'). A MCE is the issuers' right to call the CBLC, which leads to the suspension of the CBLC, should it reach the call price, prior to the expire date of the CBLC.

The call price is either at or above the exercise price of the underlying instrument. If the call price is equal to the exercise price, investors will not receive any cash amount. If the call price is different from the exercise price, cash settlement will be done based on an established formula.

Personally, I don't like this feature called MCE. If the underlying security is rising and consequently the CBLC is also going in favor of the holders of CBLC, the issuer can cut short a winning hand by calling in the CBLC. In view of this feature, CBLCs should not attract high premium like CWs or normal company-issued warrants. A fair premium for CBLCs could be about 3-5%.


Table: CBLC Valuation Table as at July 16, 2010