The Lemon Fool

My mind has turned to what BBY will do at redemption. This issue from memory is £120m so not insignificant. A look at the accounts suggests to me that although BBY could redeem and issue no new notes or debt, my guess is that they would probably want to do something half way house, maybe for £60-£100m. Of course any new financing would be at lower than 10.75%.

I note that as pref shares count are equity and bonds are debt, that doing a new bond issue would be counted as debt and I wonder given all the attention to debt in the construction sector whether BBY might be tempted to roll the pref shares with new terms, say at around 6-7% with again a conversion option and also an option to redeem at par if you don't want to roll.

I'm assuming rolling the pref shares into something else would be cheaper in fees for BBY than an new issue? Would that be correct?

My knowledge in this area is fairly limited and I wondered what other people's thoughts were?

Gan020 wrote:My mind has turned to what BBY will do at redemption. This issue from memory is £120m so not insignificant. A look at the accounts suggests to me that although BBY could redeem and issue no new notes or debt, my guess is that they would probably want to do something half way house, maybe for £60-£100m. Of course any new financing would be at lower than 10.75%.

I note that as pref shares count are equity and bonds are debt, that doing a new bond issue would be counted as debt and I wonder given all the attention to debt in the construction sector whether BBY might be tempted to roll the pref shares with new terms, say at around 6-7% with again a conversion option and also an option to redeem at par if you don't want to roll.

I'm assuming rolling the pref shares into something else would be cheaper in fees for BBY than an new issue? Would that be correct?

My knowledge in this area is fairly limited and I wondered what other people's thoughts were?

The prefs are held on the balance sheet as debt. Or more accurately (before someone objects!), the liability is held as debt. I am somewhat surprised that they have not tried to tender for these as they can surely achieve much cheaper funding.

very positive trading update: https://www.londonstockexchange.com/exc ... 45359.html

With just over 6 months to maturity, what could go wrong?

Great set of results from BBY: https://m.londonstockexchange.com/excha ... 55926.html

Fingers crossed hiriskpaul - I just bought another small dumper truck's worth @ 101.90p. Hope my calculator is working properly as I make that a YTM equivalent of 9.76%. Hopefully the markets will have become a bit more normal in July and it stops me doing anything stupid with the cash in the meantime.

Whoah! Now available at 99.49p for, what I make, a YTM equiv of 19.60%!
Can that be right?
Is my calculator kaput?
What are the chances of them going bust before July or not paying up on the due date?

Laughton wrote:Whoah! Now available at 99.49p for, what I make, a YTM equiv of 19.60%!
Can that be right?
Is my calculator kaput?
What are the chances of them going bust before July or not paying up on the due date?

I do not hold these and have never really looked at them. But experience tells me the answer here has to be to have a comprehensive understanding of the terms of the instrument.

Now 99p to buy 10,000 and 99.3 for 100,000.

They only recently resumed divis on the ords.
Presumably there may be a concern about redeeming the Prefs, or perhaps it's just the general panic.

Reluctant to tie up cash when there is so much else on offer, and I already have a large position.
Hmm.
One of many hmmms.

V8

Sellers preferring to take the certainty of the cash rather than the issue being rolled. I am one of them. I sold last week.

NB - BBY said they would redeem it a couple of weeks ago, but that was a couple of weeks ago.

Another good opportunity today.

Someone in need of cash today dumped 100k @ 98p. This when they redeem at effectively 105.375p in just 77days time - 01/07/2020.

Yes, BUY BBYB in a tax-free wrapper @ 100.6p (101.14p inc costs) and you make 4.18% in 2.5months, ie a GRY of 21%pa.

I've just added to my position; whilst thanking the seller & the MM for their generosity!

SKYSHIP wrote:Another good opportunity today.

Someone in need of cash today dumped 100k @ 98p. This when they redeem at effectively 105.375p in just 77days time - 01/07/2020.

Yes, BUY BBYB in a tax-free wrapper @ 100.6p (101.14p inc costs) and you make 4.18% in 2.5months, ie a GRY of 21%pa.

I've just added to my position; whilst thanking the seller & the MM for their generosity!

Maybe the seller saw an irresistible opportunity elsewhere. I am up to my eyeballs in BBYB and I did toy with the idea of selling some a couple of weeks ago, but did not go ahead. I think I may have been quoted 98p at the time as well.

Hopefully there will still be bargains to be had in July.

My broker is currently quoting 102.93 for this. Is it such a bargain at that price, and why can't I get the price I see quoted on ADVFN?

ptr120 wrote:My broker is currently quoting 102.93 for this. Is it such a bargain at that price, and why can't I get the price I see quoted on ADVFN?

No, you would be tying up money in a rising market for a piffling gain over a few weeks.

Price... didn't look today, but depends how many you were seeking to buy and what was on offer at that time.

V8

Cancellation of BBYB

https://www.investegate.co.uk/balfour-b ... LC%20Alert

The Corp Action arrived, so barring disasters they're going to redeem.
In fact, I sold a package last week at 99p to fund a purchase elsewhere.

However, I still have a bundle, and one's thoughts turn to recycling the cash into the market.

That hoary old chestnut BOI is available at a decent yield, and slightly lower but safer is NWBD.
More towards the punt zone is PMO1 and ENQ1.
Hurricane Energy have a 7.5%/2022 convertible which I haven't tried to buy. Yet.

What do we fancy?

V8

I already have a bunch of ENQ1 - YTM looks great but they're not paying dividends in cash, just more shares and those, from memory, at 100p so surely that knocks a hole in what you might think as the yield??

Certainly not a recommendation, but last week I bought some BUR2 - Burford 6.125% 2024. They've gone up in price a bit but I still think they can be bought with a YTM of over 8.50%. Perfectly prepared to be told how stupid I've been.

Very interested to read other ideas as I too have a load of BBYB. But maybe it will pay to wait for the next down leg - all this doom and gloom about the economy and yet share and bond prices have all rocketed in the past few weeks. Can that be right?

There was some unfavorable commentary about Burford last year from Muddy Waters which sent the share price south but the company has always refuted Muddy Waters comments and has accused them of share price manipulation. I have no idea about the rights and wrongs of this but it does put me off their bonds a bit. I still like ( and hold ) NWBD and ELLA.

I too hold ELLA - but I think that Ecclesiastical is one of the companies included in the FCA supported case being brought before the Court to decide on whether insurance policy wordings generally should cover covid19 business interuption claims.

Not sure what sort of impact that would have on ELLA should the Court decide against the insurance industry.

Laughton wrote:I already have a bunch of ENQ1 - YTM looks great but they're not paying dividends in cash, just more shares and those, from memory, at 100p so surely that knocks a hole in what you might think as the yield??

Yes, PIKs. Rather have had the cash, but better than nowt. The PIKs have a nominal value of 100p, when the bonds are valued by the market at c65p so if I were looking to recycle the divis I am indeed out of pocket. Anyway, a quid's a quid, so long as they redeem rather than rolling over.

Laughton wrote:Certainly not a recommendation, but last week I bought some BUR2 - Burford 6.125% 2024. They've gone up in price a bit but I still think they can be bought with a YTM of over 8.50%. Perfectly prepared to be told how stupid I've been.

Brave perhaps. Muddy Waters are still laying siege, but their complaint is an arcane one essentially about accounting standards, and does not seem to have holed even the ords below the waterline. The bonds dropped in August when the flak started, but not hugely, and apart from that moment in March when everything dived into the briny, they have held around 90%.
So they may have been a good buy, and a change from the usual Financials.

Another point one has to ponder is tax. I know the tax tail shouldn't wag the investment cart, but HRT on bond income is higher than on Prefs divis. Marginal, but still.
Do wonder however how long the lower tax rate on divis will survive once Rishi starts scrabbling down the back of the sofa.

V8

As I'm old, all my investments are held in ISAs or my pension scheme so tax not really a worry for me - until he decides that previous governments have been too generous with either or both or these are unprecendented times calling for unprecedented measures and some changes need to be made.