The Lemon Fool

swill453 wrote:I note that most of my preference shares have been ticking downwards in the last two or three weeks. Is this normal movements related to stock market / inflation / interest rates? Or possible fear about redemption/cancellation etc.?

Inflation, at the moment.

The probability of various prefs being retired prior to 2026 is not yet on the market's radar.

Hopefully, the prices of the 'safe' prefs will fall some more. NWBD, BWRA, ELLA, AV.A/B all below the 6% yield that would make them interesting.

V8

swill453 wrote:I note that most of my preference shares have been ticking downwards in the last two or three weeks. Is this normal movements related to stock market / inflation / interest rates? Or possible fear about redemption/cancellation etc.?

(I keep for the income so normally price doesn't matter to me.)

Scott.

The cost of debt for governments has been rising fast over the last 2 months or so. Thus, the cost of debt for corporate borrowers has gone up with it. Therefore pref shares look less attractive due to the fixed coupon and the price has to adjust downward to reflect the better yield available on other debt instruments.

Some price action in NWBD. Random?

Hit a high on the 19th, then 2,000,000 sold on the 20th.

Little action today.

Nothing to see here, imho.

V8 (holds)

88V8 wrote:Hit a high on the 19th, then 2,000,000 sold on the 20th.

Traded higher, above 170p in 2017/18. 2,000,000 bought, not sold, surely?

If these keep moving up it must be ongoing bullish for the ords with the tightening risk spread, so fairly interesting for ord holders...

GS

GoSeigen wrote:

88V8 wrote:Hit a high on the 19th, then 2,000,000 sold on the 20th.

Traded higher, above 170p in 2017/18. 2,000,000 bought, not sold, surely?
If these keep moving up it must be ongoing bullish for the ords with the tightening risk spread, so fairly interesting for ord holders...

I see a volume spike on the 20th with sales of 2,000,000 including one of 1,000,000 and one at 802,500.
The price peak was on the 19th with minimal volume.
As far as I can see.

Anyway, yes they are back near a peak.

I'm still sitting on my hands as regards this year's ISA. Everything seems too high. Perhaps I just have to accept that that's how it it is.

V8

Nat West tender for 9% prefs

https://investegate.co.uk/nat.westminst ... 56180760B/

Not sure how generous it is. I make the yield 5.14% @ 175p.

From my understanding, these are pretty safe compared to other bank prefs (LLPC, LLPD), requiring a vote from class holders to retire.

Maybe the next down the list, for me, would be something like ELLA where I make the yield 5.26% but I already hold quite a lot of those so portfolio would become a bit less diversified.

On the other hand, where goes inflation and therefore possibly interest rates over the medium term with the knock on effect on prices of prefs?

and

If they do get a big takeup how does that impact on the possibilty of them getting a vote to force retirement?

Thoughts from those more knowledeable please.

Laughton wrote:Nat West tender for 9% prefs

https://investegate.co.uk/nat.westminst ... 56180760B/

Not sure how generous it is. I make the yield 5.14% @ 175p.

From my understanding, these are pretty safe compared to other bank prefs (LLPC, LLPD), requiring a vote from class holders to retire.

Maybe the next down the list, for me, would be something like ELLA where I make the yield 5.26% but I already hold quite a lot of those so portfolio would become a bit less diversified.

On the other hand, where goes inflation and therefore possibly interest rates over the medium term with the knock on effect on prices of prefs?

and

If they do get a big takeup how does that impact on the possibilty of them getting a vote to force retirement?

Thoughts from those more knowledeable please.

You are correct that cancellation via a return of capital is subject to a class vote of prefs.

For me, 175p is a nice underwrite. Normal practice would be to have gotten some commitments from institutional investors before launching.

That said, I'm quite content to hold till at least £2.

Chris

I am unsure whether to take up the offer for NWBD. On one hand 175, although not overly generous compared to the previous market price, is the highest price the pref has ever reached. But on the other hand, I would face a significant CGT bill and a CT bill for those I hold in a ltd company. I was planning on using this years annual allowances up on reducing LLPC as well, which I am far more nervous about holding at the current price than I am holding NWBD.

There is no allowance at all (other than the now stopped indexation relief) for my ltd company holding, so I face a 19% CT bill on those. However, CT is due to rise to 25% in 2023, so I might take the CT bullet and start to unwind the ltd company.

I know, tax tail wagging dog, etc. and 175 is a good exit price IMHO. I once had a target yield of 8% for the exit!

Laughton wrote:If they do get a big takeup how does that impact on the possibilty of them getting a vote to force retirement?

The offer is straightforward, with ie no "vote in favour of capital reduction in order to tender" type shenanigans, so I cannot see how this could "force retirement". We may end up with an illiquid hard to trade rump though if there is a big take up.

hiriskpaul wrote:

Laughton wrote:If they do get a big takeup how does that impact on the possibilty of them getting a vote to force retirement?

The offer is straightforward, with ie no "vote in favour of capital reduction in order to tender" type shenanigans, so I cannot see how this could "force retirement". We may end up with an illiquid hard to trade rump though if there is a big take up.

So even if there is a 99% acceptance, will the remaining 1% just continue to trade on the market ? Are there no fixed rules about this ?

Really unsure about this tender for NWBD, it's a been a rock in my portfolio for many years, perhaps a decade.

Banking the yield over that time has been very useful for my ISA's growth. Do I now bank the capital gain and bid farewell to that income? if so where do I think there are comparable returns? Nowhere without a greater degree of risk I'd have thought.

Tara wrote:

hiriskpaul wrote:

Laughton wrote:If they do get a big takeup how does that impact on the possibilty of them getting a vote to force retirement?

The offer is straightforward, with ie no "vote in favour of capital reduction in order to tender" type shenanigans, so I cannot see how this could "force retirement". We may end up with an illiquid hard to trade rump though if there is a big take up.

So even if there is a 99% acceptance, will the remaining 1% just continue to trade on the market ? Are there no fixed rules about this ?

No fixed rules and nothing in the prospectus or Articles to prevent such a situation. I have held rump issues before following a restructuring, eg LLPF, although none that were not callable and eventually called.

hiriskpaul wrote:

Tara wrote:

hiriskpaul wrote:
The offer is straightforward, with ie no "vote in favour of capital reduction in order to tender" type shenanigans, so I cannot see how this could "force retirement". We may end up with an illiquid hard to trade rump though if there is a big take up.

So even if there is a 99% acceptance, will the remaining 1% just continue to trade on the market ? Are there no fixed rules about this ?

No fixed rules and nothing in the prospectus or Articles to prevent such a situation. I have held rump issues before following a restructuring, eg LLPF, although none that were not callable and eventually called.

I had something similar with LLPG I think it was. The main issue was the lack of liquidity which meant that the rump had wide spreads and getting online quotes were tricky. I wouldn't personally want to get stuck with a tiny rump holding like that again. I have no NWBD but if I didn't, I'd be reluctantly taking the money and looking for options elsewhere.

hiriskpaul wrote:
We may end up with an illiquid hard to trade rump though if there is a big take up.

Though the institutional takeup will be announced on the 16th June, 9 days before the retail offer closes, so it should be possible for retail holders to see how much institutional interest there is before making a decision.

PeterGray wrote:

hiriskpaul wrote:
We may end up with an illiquid hard to trade rump though if there is a big take up.

Though the institutional takeup will be announced on the 16th June, 9 days before the retail offer closes, so it should be possible for retail holders to see how much institutional interest there is before making a decision.

That's my plan.

BigTim wrote:....where do I think there are comparable returns? Nowhere without a greater degree of risk I'd have thought.

This is the question.
The price is fair, if one wanted to get out, but NWBD is undated and pretty much secure from being 'retired'.
When I sold most of my FI last year, I kept this and AV.A/B, ELLA, NATW - OK, NATW is not a Pref - so if I cash in, what to buy.

Mentioning NATW, this also is tendered, at 185 / 6.2% which is a good price, better than a five-year high.
We're not allowed to buy any more as NW won't produce a KID. Again, it's undated, well actually it's callable in 2052 so it's undated as far as I'm concerned. Originally it was a larger issue than NWBD - £200mio against £140mio, but here aren't so as many of these extant now, and I would guess that this is the one NW really want to retire.
Again though, how to replace the income?

Unless I'm just going to shuffle off to ITs, some of which offer a pretty secure divi, but not bombproof as these two NW issues have been.

All that said, in terms of getting out this level of tender seems unlikely to be repeated any time soon... when inflation gets going the prices will start to drift down.

And in tax terms, I have some losses I could offset.
Otoh, NATW is only held in my ISA

One way and another, urrgh.

V8

Though the institutional takeup will be announced on the 16th June

Will we be able to tell from the announcement what percentage of the institutional holdings have accepted and what amount institutions retain? If so, I guess I'll wait for that news although, as things stand, I'm minded to decline offer.

Laughton wrote:

Though the institutional takeup will be announced on the 16th June

Will we be able to tell from the announcement what percentage of the institutional holdings have accepted and what amount institutions retain? If so, I guess I'll wait for that news although, as things stand, I'm minded to decline offer.

Initially I thought so, but now I am not so sure:

Announcement of Result of Offers to Institutional Holders

Announcement of the Issuer's decision whether to accept valid tenders of Securities for purchase pursuant to the Offers to Institutional Holders.

Details of:

(i) the final aggregate principal amount or liquidation preference of the Securities of each Series validly tendered pursuant to the Offers prior to the Institutional Holder Expiration Deadline; and

(ii) the principal amount or liquidation preference of Securities of each Series that will remain outstanding after the Institutional Holder Settlement Date,

It is a question of what the number outstanding is and/or whether the announcement gives any indication of the amount NOT taken up by Institutional Holders.

What to replace NWBD with? There's BOI (BANK OF IRELAND GROUP 13 3/8% UNSECURED PERPETUAL SUBORDINATED BONDS) yielding 6%. Went through a bit of a wobble during the crisis but seems pretty steady now.