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NatWest Preference shares and a Labour Government

Gilts, bonds, and interest-bearing shares
Tara
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NatWest Preference shares and a Labour Government

#169612

Postby Tara » September 27th, 2018, 7:46 pm

If there was a majority Labour Government within the next few months and RBS was still then 62% owned by the Government at that time, do people think that this situation would have any kind of specific risk for the NatWest Preference shares NWBD ?

I know the general risks for all fixed interest and Preference shares of possible increased interest rates with a Labour Government, but do people think that there are any kind of specific expropriation type risks with NWBD given the majority RBS stake owned by a Labour Government ? And if so, how likely are these risks ?

Labour has made it clear that it wants to nationalise Water, Energy, Rail and Mail, but there was little talk at the recent Labour conference about taking back control of any of the banks.

The obvious concern for investors is that Labour offer below market compensation for any shares that they nationalise, and Labour have said that Parliament will decide what price is paid for the shares.

But what does this mean exactly ? Are there any rules for compensation or can a Labour Government just decide on any price ?

For example, if Labour have a majority of MPs in the next Parliament is there anything to actually stop Labour from nationalising all of the main banks such as Lloyds, Barclays, and RBS, for zero compensation to shareholders ?

And in an extreme situation, thinking of Venezuela, is there anything to actually stop Corbyn and a Marxist Labour Government from nationalising any UK company such as Vodafone or Tesco for zero compensation to shareholders ?

hiriskpaul
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Re: NatWest Preference shares and a Labour Government

#169635

Postby hiriskpaul » September 27th, 2018, 9:02 pm

Tara wrote:If there was a majority Labour Government within the next few months and RBS was still then 62% owned by the Government at that time, do people think that this situation would have any kind of specific risk for the NatWest Preference shares NWBD ?

I know the general risks for all fixed interest and Preference shares of possible increased interest rates with a Labour Government, but do people think that there are any kind of specific expropriation type risks with NWBD given the majority RBS stake owned by a Labour Government ? And if so, how likely are these risks ?

Labour has made it clear that it wants to nationalise Water, Energy, Rail and Mail, but there was little talk at the recent Labour conference about taking back control of any of the banks.

The obvious concern for investors is that Labour offer below market compensation for any shares that they nationalise, and Labour have said that Parliament will decide what price is paid for the shares.

But what does this mean exactly ? Are there any rules for compensation or can a Labour Government just decide on any price ?

For example, if Labour have a majority of MPs in the next Parliament is there anything to actually stop Labour from nationalising all of the main banks such as Lloyds, Barclays, and RBS, for zero compensation to shareholders ?

And in an extreme situation, thinking of Venezuela, is there anything to actually stop Corbyn and a Marxist Labour Government from nationalising any UK company such as Vodafone or Tesco for zero compensation to shareholders ?

They would face a battle in court if they tried to nationalise any private company, but the government can of course pass laws. The country would likely face a capital flight and be viewed as a pariah state. A lot of the shares in UK listed companies are held overseas and overseas governments will not take kindly to their pension funds, sovereign wealth funds, etc. being raided by the UK government and sanctions would likely follow. In short, a massive nationalisation programme at zero or very low ball prices would likely be suicidal for the government. I see it as a very low probability event.

On the specifics of RBS, one of the curious and historically useful things about NWBD is that it is part of NatWest's capital, not RBS's. That has made it harder to get at in the past and it paid right through the financial crisis, even in the depths of RBS's troubles. The price did go very low though! I have always held the view that full nationalisation or PRA resolution would likely leave NWBD intact as NatWest would be sold as a going concern. It is hard to see why the PRA or government would want to tinker with NatWest's capital structure unless of course it was NatWest that was in deep trouble and RBS could not inject more capital. Even if Corbyn nationalised RBS (a truly crazy thing to do by the way), I think there is a good chance that NWBD would survive.

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Re: NatWest Preference shares and a Labour Government

#169967

Postby ChrisNix » September 28th, 2018, 10:32 pm

I tend to agree.

That said, NWBD would be the least of our problems!

Chris :shock:

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Re: NatWest Preference shares and a Labour Government

#185119

Postby Wizard » December 6th, 2018, 3:15 pm

Given the ring fence / non-ring fence restructuring in RBS is it still the case that NatWest Bank Plc is the issuer of NWBD? As opposed to NatWest Markets Plc (formerly RBS Plc) or RBS Plc (formerly Adam & Company) or indeed any other entity.

Terry.

hiriskpaul
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Re: NatWest Preference shares and a Labour Government

#185128

Postby hiriskpaul » December 6th, 2018, 4:17 pm

Yes NWBD is still issued by National Westminster Bank Plc (NatWest), which is part of NatWest Holding plc, along with Royal Bank of Scotland plc (as you say, formerly Adam & Company PLC) and Ulster Bank Ireland. NatWest Holding plc is the part which is entirely inside the ring-fence, so NatWest is entirely ring-fenced. I am not aware of any way in which the issuer of NWBD can be changed, but could be wrong on this and would be very interested to hear if anyone thinks otherwise. Is there any legal way in which a company's preference shares can be pushed into a separate entity?

Some parts of NatWest Bank have been moved out of ring-fence to a bank now confusingly called NatWest Markets plc, formerly The Royal Bank of Scotland plc! This bank has nothing to do with National Westminster Bank Plc or NatWest Holdings plc other than that they are all part of Royal Bank of Scotland Group plc.

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Re: NatWest Preference shares and a Labour Government

#185190

Postby GoSeigen » December 6th, 2018, 10:51 pm

hiriskpaul wrote: Is there any legal way in which a company's preference shares can be pushed into a separate entity?


The same way its ordinary shares would be pushed into a separate entity...

GS

hiriskpaul
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Re: NatWest Preference shares and a Labour Government

#185195

Postby hiriskpaul » December 6th, 2018, 11:25 pm

GoSeigen wrote:
hiriskpaul wrote: Is there any legal way in which a company's preference shares can be pushed into a separate entity?


The same way its ordinary shares would be pushed into a separate entity...

GS

OK, but how can that be done?

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Re: NatWest Preference shares and a Labour Government

#185263

Postby GoSeigen » December 7th, 2018, 8:58 am

hiriskpaul wrote:
GoSeigen wrote:
hiriskpaul wrote: Is there any legal way in which a company's preference shares can be pushed into a separate entity?


The same way its ordinary shares would be pushed into a separate entity...

GS

OK, but how can that be done?


Sorry, I left out the smiley. Prefs can no more be shifted into another entity than ords can, short of the shareholders agreeing to any change, as happens in takeovers etc. Of course, if the ord shareholders wished to do something like this over the heads of the pref shareholders and had the resources, they could simply repay the prefs in a capital reduction if their terms allow it -- as we have already seen.


GS

tjh290633
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Re: NatWest Preference shares and a Labour Government

#185282

Postby tjh290633 » December 7th, 2018, 10:02 am

GoSeigen wrote:
hiriskpaul wrote: Is there any legal way in which a company's preference shares can be pushed into a separate entity?


The same way its ordinary shares would be pushed into a separate entity...

GS

Studying the procedure by which HBOS was absorbed by Lloyds TSB in 2009 might reveal the method.

TJH

hiriskpaul
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Re: NatWest Preference shares and a Labour Government

#185283

Postby hiriskpaul » December 7th, 2018, 10:08 am

tjh290633 wrote:
GoSeigen wrote:
hiriskpaul wrote: Is there any legal way in which a company's preference shares can be pushed into a separate entity?


The same way its ordinary shares would be pushed into a separate entity...

GS

Studying the procedure by which HBOS was absorbed by Lloyds TSB in 2009 might reveal the method.

TJH

In that instance, the HBOS prefs were replaced by Lloyds prefs on similar terms.

hiriskpaul
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Re: NatWest Preference shares and a Labour Government

#185289

Postby hiriskpaul » December 7th, 2018, 10:19 am

GoSeigen wrote:
hiriskpaul wrote:
GoSeigen wrote:
The same way its ordinary shares would be pushed into a separate entity...

GS

OK, but how can that be done?


Sorry, I left out the smiley. Prefs can no more be shifted into another entity than ords can, short of the shareholders agreeing to any change, as happens in takeovers etc. Of course, if the ord shareholders wished to do something like this over the heads of the pref shareholders and had the resources, they could simply repay the prefs in a capital reduction if their terms allow it -- as we have already seen.


GS

NWBD requires a class vote before they can be repaid in a capital reduction. Whether some smart lawyers could find a way round that is another matter!

Now all the US preferreds have been called, NWBD is the only remaining NatWest preference share. It will be interesting to see whether NatWest tenders for them.

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Re: NatWest Preference shares and a Labour Government

#185292

Postby scrumpyjack » December 7th, 2018, 10:27 am

An incoming Labour government would have its hands pretty fully nationalising the utilities and railways. As for the banks they are more likely to prioritise controlling their lending policies in some way, rather than nationalising them. The consequence might be cuts in bank ordinary dividends but if RBS carried on with NW pref divis throughout the financial crisis, they would probably carry on for awhile under the new communist Corbyn government.

ChrisNix
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Re: NatWest Preference shares and a Labour Government

#185604

Postby ChrisNix » December 8th, 2018, 2:31 pm

The issuer was the parent of the NatWest Group and is the cornerstone of the NatWest branding. To move the company (and thus its shares, including the prefs) out of the ring fenced group would mean most, if not all, of its subs would need to be moved out into another holding company in the ring fenced group. Not impossible, but a very major exercise, and most certainly not worth the candle if the prefs were the only rationale.

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Re: NatWest Preference shares and a Labour Government

#185697

Postby csearle » December 9th, 2018, 1:28 am

Moderator Message:
The OP was asking about NatWest Preference shares in the event of a Corbyn government rather than a largely political discussion. Please try to stay focussed team. Thanks - Chris


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