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RAVP

Gilts, bonds, and interest-bearing shares
DampSeaweed
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RAVP

#219495

Postby DampSeaweed » May 4th, 2019, 12:29 pm

I’ve held these prefs for many years now, and they have delivered very nicely.
However I’ve got it firmly lodged in my mind that part of the reason for the high yield is that buried in the prospectus is a clause that permits these prefs to be redeemed at par (ie 100p) in the event that the company is sold or acquired by another company.
So firstly, am I correct in this understanding ? . And secondly, if correct, with the amendment coming out of the ‘Aviva’ issue, has that risk disappeared or diminished ?

hiriskpaul
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Re: RAVP

#219506

Postby hiriskpaul » May 4th, 2019, 1:10 pm

DampSeaweed wrote:I’ve held these prefs for many years now, and they have delivered very nicely.
However I’ve got it firmly lodged in my mind that part of the reason for the high yield is that buried in the prospectus is a clause that permits these prefs to be redeemed at par (ie 100p) in the event that the company is sold or acquired by another company.
So firstly, am I correct in this understanding ? . And secondly, if correct, with the amendment coming out of the ‘Aviva’ issue, has that risk disappeared or diminished ?

There is no right to redeem at par, or any other price. In light of the Aviva issue, Raven modified their Articles to make it clear that a class vote was required to repay on reduction of capital. I wish other issuers would do the same!

Ps the reason for the high yield can be summed up in one word - Russia, which I note has been dropped from the company name.

hiriskpaul
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Re: RAVP

#219508

Postby hiriskpaul » May 4th, 2019, 1:20 pm

Actually, you have lodged a small doubt in my mind about what happens in the case of a takeover. I will check, but will not be able to until Tuesday. Perhaps someone else knows.

hiriskpaul
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Re: RAVP

#219512

Postby hiriskpaul » May 4th, 2019, 1:36 pm

By the way, last time I checked, the Directors owned around 10% of the prefs, so we are unlikely to get stitched up! The largest holder is Invesco and they are also the largest shareholder, which again is reassuring.

hiriskpaul
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Re: RAVP

#219515

Postby hiriskpaul » May 4th, 2019, 1:50 pm

I managed to load the Articles on my phone and found that in the event of a takeover, pref holders have the right to ask for their shares to be redeemed, but the company has no right to redeem without notification from a holder.

DampSeaweed
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Re: RAVP

#219527

Postby DampSeaweed » May 4th, 2019, 3:22 pm

Thanks for looking Paul. I remember noting that the biggest pref holders where also big ordinary shareholders. And that gave me some comfort. I don’t own any of the ordinaries. I never really understood the messy way of paying dividends and so they never appealed to me.
I’m still not sure the extent to which I consider the redemption on acquisition a real risk. If it was clear that they could only be redeemed at ‘fair market value’ , then I wouldn’t have a problem. But this Aviva fiasco has created a whole new level of concern and doubt, where previously there was almost none.
Unfortunately I’ve ended up in a bit of a greed trap. The divi of circa 8.3% would be difficult to replace, but I have too many of these in my portfolio and really ought to reduce.
I’ve got the same problem with BOI. In this case the next best alternative is not quite so far below on the yield ladder. But I do have a heck of a lot more of these than RAVP.

If we accept that most prefs are yielding ~6+%. Then is the 2% risk premium for RAVP purely about fear from Russian intervention eg seizure of assets ? Currency restrictions ?

Wozzitworthit
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Re: RAVP

#219539

Postby Wozzitworthit » May 4th, 2019, 4:28 pm

Just to deviate very slightly - I hold a few RAVC - the 6.5% Convertible Shares, as I know a few of the old TMF posters do as well if I recall correctly

These appear, according to the prospectus, to rank above RAVP.

They mature in July 2026 at 135p per share

This from the prospectus

Subject to being permitted to do so by law, the Convertible
Preference Shares shall be redeemed by the Company on the tenth
anniversary of their issue (the “Redemption Date”). The amount to
be paid per Convertible Preference Share on the Redemption Date
will be £1.35 together with a sum equal to any arrears or accrual of
the cumulative preferential dividend.
Following completion of a Potential Takeover, the Company may,
following such completion, redeem on a pro rata basis by notice all
or any Convertible Preference Shares (that have not been converted
into Ordinary Shares on or prior to such completion). The amount
to be paid per Convertible Preference Share on such redemption
will be the aggregate of £1.00 and an amount equal to 3.5 pence for
each completed 12 month period (and pro-rated in respect of a part
12 month period) that has elapsed from the date of issue of the
Convertible Preference Share until the redemption date, together
with a sum equal to any arrears or accrual of the cumulative
preferential dividend.
Save as set out above, the Convertible Preference Shares will not be
capable of being redeemed although the Company will have the
ability to buy back the Convertible Preference Shares in the usual
manner.




I bought a very few more recently, at a YTM of around 7.23% - I like the idea of the bond like nature of these and the fact there is an end in sight !!

I considered moving out of RAVP which I also hold a small amount of, into these, and taking a small gain but a larger drop in dividend, but haven't yet

Edited couple of typos

Woz

GoSeigen
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Re: RAVP

#219552

Postby GoSeigen » May 4th, 2019, 5:17 pm

DampSeaweed wrote:Thanks for looking Paul. I remember noting that the biggest pref holders where also big ordinary shareholders. And that gave me some comfort. I don’t own any of the ordinaries. I never really understood the messy way of paying dividends and so they never appealed to me.
I’m still not sure the extent to which I consider the redemption on acquisition a real risk. If it was clear that they could only be redeemed at ‘fair market value’ , then I wouldn’t have a problem. But this Aviva fiasco has created a whole new level of concern and doubt, where previously there was almost none.


RAVP are redeemable shares, so there is no question that the issuer has the right to redeem them, in specific circumstances. You have agreed that the price for such a redemption is £1.

I wouldn't call what happened with Aviva a fiasco. Such "fiascos" happen practically daily on the stock exchanges.

With RAVP, as others have pointed out, the shareholders have voted to vary the terms of the shares and remove the possibility of reduction of capital for the preference shares [sorry don't know the detail of the change]. Of course if it ever became convenient to do so they could easily reverse that decision, and why shouldn't they?

GS

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Re: RAVP

#219554

Postby GoSeigen » May 4th, 2019, 5:24 pm

Wozzitworthit wrote:
I bought a very few more recently, at a YTM of around 7.23% - I like the idea of the bond like nature of these and the fact there is an end in sight !!

Woz


Woz, if you think these are like bonds I'd say you're deceiving yourself. They are common or garden redeemable preference shares, absolutely 100% not debt. What makes you feel they are bond-like?


GS

hiriskpaul
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Re: RAVP

#219569

Postby hiriskpaul » May 4th, 2019, 6:44 pm

GoSeigen wrote:
DampSeaweed wrote:Thanks for looking Paul. I remember noting that the biggest pref holders where also big ordinary shareholders. And that gave me some comfort. I don’t own any of the ordinaries. I never really understood the messy way of paying dividends and so they never appealed to me.
I’m still not sure the extent to which I consider the redemption on acquisition a real risk. If it was clear that they could only be redeemed at ‘fair market value’ , then I wouldn’t have a problem. But this Aviva fiasco has created a whole new level of concern and doubt, where previously there was almost none.


RAVP are redeemable shares, so there is no question that the issuer has the right to redeem them, in specific circumstances. You have agreed that the price for such a redemption is £1.

I wouldn't call what happened with Aviva a fiasco. Such "fiascos" happen practically daily on the stock exchanges.

With RAVP, as others have pointed out, the shareholders have voted to vary the terms of the shares and remove the possibility of reduction of capital for the preference shares [sorry don't know the detail of the change]. Of course if it ever became convenient to do so they could easily reverse that decision, and why shouldn't they?

GS

Class approval (75% by special resolution) is required to remove the new rights attached to RAVP, so although the Articles could be amended again and the rights taken away, it is not likely to happen unless pref holders judge it in their best interests to do so.

RAVP can be redeemed at £1, but only at the direction of a pref holder and then only in the case of a takeover. I see this as a valuable right for pref holders.

hiriskpaul
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Re: RAVP

#219571

Postby hiriskpaul » May 4th, 2019, 6:58 pm

DampSeaweed wrote:Thanks for looking Paul. I remember noting that the biggest pref holders where also big ordinary shareholders. And that gave me some comfort. I don’t own any of the ordinaries. I never really understood the messy way of paying dividends and so they never appealed to me.
I’m still not sure the extent to which I consider the redemption on acquisition a real risk. If it was clear that they could only be redeemed at ‘fair market value’ , then I wouldn’t have a problem. But this Aviva fiasco has created a whole new level of concern and doubt, where previously there was almost none.
Unfortunately I’ve ended up in a bit of a greed trap. The divi of circa 8.3% would be difficult to replace, but I have too many of these in my portfolio and really ought to reduce.
I’ve got the same problem with BOI. In this case the next best alternative is not quite so far below on the yield ladder. But I do have a heck of a lot more of these than RAVP.

If we accept that most prefs are yielding ~6+%. Then is the 2% risk premium for RAVP purely about fear from Russian intervention eg seizure of assets ? Currency restrictions ?

Well i bought with a yield of about 10% and had in mind I would sell if the yield went below 8%. Purely because of the Russian factor. I only have a small position and am not inclined to increase it at current prices. If I did buy, I would more likely go for RAVC, as mentioned by woz, for the reason he states. Again I have a small position in RAVC.

I think extreme caution is in order with anything related to Russia. Rule of law not being one of their strengths is a particular concern.

I have become increasingly paranoid with a lot of fixed income products since the ECN days and sold quite a few LLPC last week, using up this year's CGT allowance. Issuers do not seem to have as much concern about acting against bond and pref holders best interests as I would like!

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Re: RAVP

#219576

Postby Wozzitworthit » May 4th, 2019, 7:17 pm

GoSeigen wrote:
Wozzitworthit wrote:
I bought a very few more recently, at a YTM of around 7.23% - I like the idea of the bond like nature of these and the fact there is an end in sight !!

Woz


Woz, if you think these are like bonds I'd say you're deceiving yourself. They are common or garden redeemable preference shares, absolutely 100% not debt. What makes you feel they are bond-like?


GS


GS

I'm not deceiving myself - I know the difference - I was merely thinking that these are not "perpetual" but have, assuming nothing untoward happens, a "life"

Much too light a comparison and I wish I had never wrote tha "like" sentence !


Apologies if I have lead anyone up the common or garden path

Woz

Kenny
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Re: RAVP

#225201

Postby Kenny » May 29th, 2019, 11:22 am

Just to clarify the terms for RAVP because the above discussion may be a little unclear to some readers.

The company has no rights to redeem RAVP unless 75% of class holders vote for redemption.

In the event of a takeover, the company is obliged to offer to redeem at 100p but a holder does not need to accept. In those circumstances, the buyer may keep the quote for RAVP or a holder may choose to retain their holding and keep collecting the coupon.

Accordingly, RAVP is one of very few cumulative and irredeemable preference shares quoted in London.

GoSeigen
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Re: RAVP

#225228

Postby GoSeigen » May 29th, 2019, 12:44 pm

Kenny wrote:Just to clarify the terms for RAVP because the above discussion may be a little unclear to some readers.

The company has no rights to redeem RAVP unless 75% of class holders vote for redemption.

In the event of a takeover, the company is obliged to offer to redeem at 100p but a holder does not need to accept. In those circumstances, the buyer may keep the quote for RAVP or a holder may choose to retain their holding and keep collecting the coupon.

Accordingly, RAVP is one of very few cumulative and irredeemable preference shares quoted in London.



I'm afraid this is wrong. RAVP are redeemable shares. The existence of certain conditions to redemption does not change that fact. Please refer to 2.14 Redemption in the company Articles of Incorporation:

https://www.theravenpropertygroup.com/m ... ration.pdf


Please also note that the issuer Raven Property Group is incorporated under Guernsey Company Law, not English. There are significant differences.

If the above author wishes to continue asserting that the shares are irredeemable I think he needs to state his credentials (e.g. has he been employed as a company secretary?) and/or quote documentation supporting his case.


GS

everhopeful
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Re: RAVP

#225232

Postby everhopeful » May 29th, 2019, 1:00 pm

I have held these for some time and have enjoyed the income. The important semantics which GS highlights do not detract from the points that Kenny makes about the relative safety of these from forced redemption as compared to some other prefs. The risk seems to me to be much more geopolitical but for the yield I am happy to take that risk.

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Re: RAVP

#225244

Postby GoSeigen » May 29th, 2019, 1:30 pm

everhopeful wrote:I have held these for some time and have enjoyed the income. The important semantics which GS highlights do not detract from the points that Kenny makes about the relative safety of these from forced redemption as compared to some other prefs. The risk seems to me to be much more geopolitical but for the yield I am happy to take that risk.



Thanks for the thumbs up.


I'd just question this concept of "forced redemption" though. Redemption is almost never a negative for an investor. If you want to be invested, simply repurchase shares. If you don't, you now hold cash and have no further risk in the business.


There is a tendency for investors here to only think of their own perspective. I can assure them that the irredeemability or otherwise of a share is often of vital importance to e.g. the creditors of the company. A redeemable share allows shareholders to extract their capital from the company without any recourse for the creditors, which can leave their loans more exposed than if the shares were irredeemable. Don't forget that for very good reasons companies are generally prohibited by law from acquiring their own shares...

If anyone wishes to give up their capital forever I am starting up a new business and will happily issue irredeemable perpetual shares to any interested investor. No takers? Hmm, I wonder why that is????

GS

Kenny
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Re: RAVP

#225264

Postby Kenny » May 29th, 2019, 2:41 pm

GoSeigen wrote:
Kenny wrote:Just to clarify the terms for RAVP because the above discussion may be a little unclear to some readers.

The company has no rights to redeem RAVP unless 75% of class holders vote for redemption.

In the event of a takeover, the company is obliged to offer to redeem at 100p but a holder does not need to accept. In those circumstances, the buyer may keep the quote for RAVP or a holder may choose to retain their holding and keep collecting the coupon.

Accordingly, RAVP is one of very few cumulative and irredeemable preference shares quoted in London.



I'm afraid this is wrong. RAVP are redeemable shares. The existence of certain conditions to redemption does not change that fact. Please refer to 2.14 Redemption in the company Articles of Incorporation:

https://www.theravenpropertygroup.com/m ... ration.pdf


Please also note that the issuer Raven Property Group is incorporated under Guernsey Company Law, not English. There are significant differences.

If the above author wishes to continue asserting that the shares are irredeemable I think he needs to state his credentials (e.g. has he been employed as a company secretary?) and/or quote documentation supporting his case.


GS


There is no Clause 2.14 which relates to RAVP.

Redemption terms for the preference shares are set out in Clause 2.7 - which I have summarised in my earlier post.

See also Clause 2.7.11 which I have copied below:
"Save as expressly provided in this Article 2.7, the Company and the holders of the Preference Shares shall have no right to redeem the Preference Shares."

I think you will find that the Clause 2.14 to which you refer are part of the terms relating to the convertible preference shares, namely RAVC.

Perhaps you have got confused because the company has two classes of preference shares.

Accordingly, I repeat, and trust you now agree that RAVP is one of very few cumulative and irredeemable preference shares quoted in London.

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Re: RAVP

#225458

Postby GoSeigen » May 30th, 2019, 10:36 am

Kenny wrote:
GoSeigen wrote:
Kenny wrote:Accordingly, RAVP is one of very few cumulative and irredeemable preference shares quoted in London.



I'm afraid this is wrong. RAVP are redeemable shares. The existence of certain conditions to redemption does not change that fact. Please refer to 2.14 Redemption in the company Articles of Incorporation:

https://www.theravenpropertygroup.com/m ... ration.pdf


Please also note that the issuer Raven Property Group is incorporated under Guernsey Company Law, not English. There are significant differences.

If the above author wishes to continue asserting that the shares are irredeemable I think he needs to state his credentials (e.g. has he been employed as a company secretary?) and/or quote documentation supporting his case.


GS


There is no Clause 2.14 which relates to RAVP.

Apologies, yes, it's 2.7 for RAVP.

Redemption terms for the preference shares are set out in Clause 2.7 - which I have summarised in my earlier post.

Okay, but Kenny claimed pretty clearly in that post (quoted and emboldened above) that the shares were irredeemable. Now he implies they are not by referencing the redemption terms.

See also Clause 2.7.11 which I have copied below:
"Save as expressly provided in this Article 2.7, the Company and the holders of the Preference Shares shall have no right to redeem the Preference Shares."


I'm sure no-one would dispute the meaning of the phrase "Save as expressly provided..."

So that clause means there IS a right to redeem, not that there isn't.

I think you will find that the Clause 2.14 to which you refer are part of the terms relating to the convertible preference shares, namely RAVC.

Perhaps you have got confused because the company has two classes of preference shares.


Both classes of preference share are redeemable.

I copied and pasted the wrong Section title, yes. But RAVP redemption terms are also right there in the same document, as referred to by Kenny.
Accordingly, I repeat, and trust you now agree that RAVP is one of very few cumulative and irredeemable preference shares quoted in London.


No RAVP categorically is not irredeemable, as Kenny has demonstrated with his quotations and references.

[EDIT: corrected reference and link]
RAVP is a redeemable share under Sections 310-325 of the The Companies (Guernsey) Law, 2008 and subject to its provisions.

http://www.guernseylegalresources.gg/CH ... =70745&p=0


GS
P.S. IANAL, just happen to have read the relevant law.

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Re: RAVP

#225485

Postby hiriskpaul » May 30th, 2019, 12:17 pm

I agree with GS, RAVP is definitely redeemable. It is there in black and white in the Articles. What is important from an investment point of view are the conditions under which RAVP can be redeemed. These are in section 2.7. The fact that RAVP is redeemable is a good thing from the perspective of pref holders. It means holders can force the company to redeem "In the event of a Potential Takeover".

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Re: RAVP

#225499

Postby Kenny » May 30th, 2019, 12:59 pm

If I may clarify, there are two circumstances where the issue of redemption may occur:

1. If the company proposes a redemption of RAVP, however that redemption is structured, it must be passed by a class vote of at least 75% of that class. This is rather like turkey’s voting for Xmas, so unless the price is very attractive, this type of redemption is not going to occur. It is also relevant to highlight that some of the large ordinary holders are also material holders of RAVP.

2. If there is a takeover of the company, then the company must offer to redeem RAVP at 100p albeit a holder cannot be forced to redeem and can decline the offer.

Because of the above circumstances I believe the shares are, in practical effect, irredeemable. Certainly, any action which could lead to a redemption rests solely within the control of shareholders of RAVP. My apologies for not explaining the subtleties in detail.


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