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RAVP

Gilts, bonds, and interest-bearing shares
GoSeigen
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Re: RAVP

#225523

Postby GoSeigen » May 30th, 2019, 2:40 pm

Kenny wrote: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.


Here's the problem. Kenny is using a term with a specific meaning in a way it is not intended to be used. Irredeemable does NOT mean "can be redeemed". Irredeemable does NOT mean "cannot be redeeemed".


The words redeemable and irredeemable refer to a specific property of a share. Every share from the moment it is issued/created has the property of being either redeemable or not (i.e. irredeemable). There is no intermediate state: a share or share class cannot be "practically irredeemable".

If you say a share is redeemable, then that means it was issued with terms which permit its redemption as defined in the Companies Act.
If you say a share is irredeemable, then it means it was issued without that language in its terms.


So to look at RAVP: when it was issued, if it had redemption terms -- which it did -- then it had the property of being a redeemable share. That property remains so long as the shares remain in existence. This by the way is not mere convention: it is required and regulated by law, certainly UK company law.


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.


I suspect Kenny is just trying to say that the share is redeemable but he foresees no circumstance in which it would be redeemed. That is fair enough but it is NOT the same as saying the share is irredeemable. The issue here is not subtleties but opinion vs fact: if it's just an opinion then state it as an opinion, not as an incorrect assertion of fact!

One may think the above is academic but if Kenny says "any action which could lead to a redemption rests solely within the control of shareholders of RAVP" then:

1. This is directly as a result of RAVP's terms of redemption, i.e. arising from the fact that the share was made redeemable at issue.
2. It is of vital concern to certain stakeholders in the company, like creditors or acquirers of the company, not least because companies are generally prohibited from acquiring their own shares no matter who makes the call. The only way UK companies [Guernsey might be the same, I don't know] can acquire them is via the [three] mechanisms expressly permitted in the companies act, one of which is redemption. If a share is not redeemable then the process of redemption is unavailable for those shares, no matter what the circumstances.


GS

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Re: RAVP

#225533

Postby Alaric » May 30th, 2019, 3:30 pm

GoSeigen wrote:The words redeemable and irredeemable refer to a specific property of a share.


Citation please to confirm that would be the only usage.

The term irredeemable was in common use to refer to the UK Government's borrowings which didn't have a fixed maturity date.

What would be your concise term for a bond like share with no fixed maturity date and for most practical purposes no issuer option to repay?

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Re: RAVP

#225544

Postby Kenny » May 30th, 2019, 4:04 pm

I guess I have been lax in explaining the point I was making – so I set myself up for a pedantic rebuttal!

There is nothing I really disagree with in the previous posts. However, what the real-world situation is, has been lost in the discussion. People are probably left with the impression that redemption is a likely scenario with RAVP, when nothing could be further from the truth.

After the Aviva debacle, the company changed the terms relating to RAVP to introduce the class vote terms in relation to redemption. In legal terms, they were granting holders a right which the company previously held.

Many preference shares which have “irredeemable” in their title do not contain class votes in relation to redemption. Although they are called irredeemable, when you look at their terms, you find they are potentially exposed to the same legal ruse Aviva proposed.

Apart from RAVP, I know of only one other preference share which has a class vote restriction upon any redemption the company may consider. I do not know of any that have terms which mean they can continue post a takeover.

In my opinion, in the real-world, RAVP are irredeemable because it is the holders that have sole control over the timing of any redemption and in particular the option to block any attempt at redemption - indefinitely.

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Re: RAVP

#225572

Postby GoSeigen » May 30th, 2019, 5:04 pm

Alaric wrote:
GoSeigen wrote:The words redeemable and irredeemable refer to a specific property of a share.


Citation please to confirm that would be the only usage.

The term irredeemable was in common use to refer to the UK Government's borrowings which didn't have a fixed maturity date.



It was my usage which the poster contradicted when he first appeared on this stale thread; it is the usage in the Companies Act; it is the usage in the company's Articles of Association which set out the terms of the shares; it is the usage in the name of the shares as found on the London Stock Exchange and elsewhere "RAVEN PROPERTY GROUP LIMITED CUM RED PREF SHS 1P"; it is the usage of any company secretary and corporate lawyer. It is not the only usage so no citation but it is the most appropriate for this thread.

Alaric bizarrely and off topic for the thread brings up an ancient and unrelated example where the use may be different: for bonds, not shares, issued by a government, not a company. Suit yourself Alaric, but if you find yourself misunderstood or worse misleading other people about the nature of their investments we know whom to blame...

What would be your concise term for a bond like share with no fixed maturity date and for most practical purposes no issuer option to repay?


What on earth is a bond-like share? There are shares and there are bonds. The share you described could be called an ordinary share. There are lots of them traded on the LSE. A bond might be described as perpetual. But I really don't see the relevance of all this to redemption.

GS

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Re: RAVP

#225582

Postby Alaric » May 30th, 2019, 5:29 pm

GoSeigen wrote:What on earth is a bond-like share?


A Preference Share. Legally a share, mathematically a fixed interest bond.

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Re: RAVP

#225607

Postby Kenny » May 30th, 2019, 6:33 pm

Before this board descends further into legalese - which has no relevance to an investment in RAVP - herewith the statement the company made on 27 April 2018 before it changed its Articles:

“Raven Russia notes the recent announcement by Aviva plc of its ability to cancel certain irredeemable shares it had issued at or close to par value through a reduction of capital, and the resulting interest from the UK Financial Conduct Authority and a number of institutional investors. The Company has taken its own legal advice on the matter. In light of that advice, the Board considers it appropriate to put to shareholders at the Annual General Meeting proposed amendments to the Articles that would provide that a reduction of capital of the Company's cumulative redeemable preference shares of 1p each ("Preference Shares") or Convertible Preference Shares (which, in effect, could implement a cancellation of such shares at a significant discount to their market price) should require the specific class consent of the relevant class of shares. The amendments will also require the class consent of the holders of Preference Shares (in so far as they relate to the rights attaching to the Preference Shares) and the holders of Convertible Preference Shares (in so far as they relate to the rights attaching to the Convertible Preference Shares).”

I thought these boards were about exchanging information about investments, not in lengthy discussion about matters which are irrelevant to real-world investing.

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Re: RAVP

#225656

Postby GoSeigen » May 30th, 2019, 9:10 pm

Kenny wrote:There is nothing I really disagree with in the previous posts. However, what the real-world situation is, has been lost in the discussion. People are probably left with the impression that redemption is a likely scenario with RAVP, when nothing could be further from the truth.

Well I certainly agree with this too. I've made no comment about the likelihood of redemption, just that the share may be redeemed and so it cannot properly be called irredeemable. Maybe the share is unlikely to be redeemed at this time, but that is a matter of opinion and judgment, not fact.


After the Aviva debacle, the company changed the terms relating to RAVP to introduce the class vote terms in relation to redemption. In legal terms, they were granting holders a right which the company previously held.


Sorry, but again, no. Redemption was not affected in any direct way. In fact the resolution passed by shareholders SPECIFICALLY said that the redemption rights attaching to the shares would NOT be altered and I quote [my bold]:

https://www.theravenpropertygroup.com/m ... rcular.pdf
there shall not take place any distribution by the Company [...] by way of a reduction of share capital [...] which for the avoidance of doubt shall not preclude any other type of distribution referred to in sections 301 and 302 of the Law including a redemption of shares in accordance with the express rights attaching to any shares in accordance with these Articles

The class rights were altered ONLY in respect of Reduction of Capital.


Many preference shares which have “irredeemable” in their title do not contain class votes in relation to redemption.


Irredeeemable shares CANNOT BE REDEEMED so the sentence above makes no sense. They have no language whatsoever permitting redemption. [Challenge: find me a single irredeemable share with redemption language in its terms. I'm not going to hold my breath...]

Perhaps Capital Reduction is being referred to above, or something else, but as written it is nonsense.

Although they are called irredeemable, when you look at their terms, you find they are potentially exposed to the same legal ruse Aviva proposed.
Apart from RAVP, I know of only one other preference share which has a class vote restriction upon any redemption the company may consider. I do not know of any that have terms which mean they can continue post a takeover.


Again, talking about redemption when something else is meant.

The so-called legal ruse referred to here is a reduction of capital, not a redemption. They are different, distinct things. If anyone doubts this go and read the RAVP class meeting circular, read the company's articles, read the Aviva press releases, taking careful note of when the word redeem is used and when the words reduction of capital are used. It's not my [pedantic] language -- it is the language of the contracts we as holders have agreed to be bound by. We might as well understand them.




In my opinion, in the real-world, RAVP are irredeemable because it is the holders that have sole control over the timing of any redemption and in particular the option to block any attempt at redemption - indefinitely.


Well, Kenny, you are entitled to your opinion but frankly mate you don't know what you're talking about. Which is probably not your fault given all the rubbish spouted on this and other bulletin boards post-Aviva, but do yourself a favour and pay attention. Otherwise don't be surprised when you lose your shirt.


GS

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Re: RAVP

#225668

Postby GoSeigen » May 30th, 2019, 10:18 pm

Kenny wrote:Before this board descends further into legalese - which has no relevance to an investment in RAVP - herewith the statement the company made on 27 April 2018 before it changed its Articles:

“Raven Russia notes the recent announcement by Aviva plc of its ability to cancel certain irredeemable shares it had issued at or close to par value through a reduction of capital, and the resulting interest from the UK Financial Conduct Authority and a number of institutional investors. The Company has taken its own legal advice on the matter. In light of that advice, the Board considers it appropriate to put to shareholders at the Annual General Meeting proposed amendments to the Articles that would provide that a reduction of capital of the Company's cumulative redeemable preference shares of 1p each ("Preference Shares") or Convertible Preference Shares (which, in effect, could implement a cancellation of such shares at a significant discount to their market price) should require the specific class consent of the relevant class of shares. The amendments will also require the class consent of the holders of Preference Shares (in so far as they relate to the rights attaching to the Preference Shares) and the holders of Convertible Preference Shares (in so far as they relate to the rights attaching to the Convertible Preference Shares).”

I thought these boards were about exchanging information about investments, not in lengthy discussion about matters which are irrelevant to real-world investing.


Hey, Kenny you were the one who came onto this old thread and started trying to tell everyone what was going on. I have simply been addressing your misinformation. Don't start abusing people (e.g. controlling what they say) just because you have been called out.

Where in the above quoted text is redemption referred to? Nowhere. The topic of the quotation is reduction of capital, not redemption. Reduction of capital is applicable to both redeemable (e.g. RAVP) and irredeemable (e.g. Aviva) shares as will be evident on a careful reading the quoted text.


GS

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Re: RAVP

#225678

Postby Kenny » May 30th, 2019, 11:48 pm

I am retiring from this exchange because I do not understand what it is about.

As for losing my shirt – I think I will console myself planning what to do with my quarterly dividend of £43,851.27 due from RAVP at the end of June.

Always best not to engage with madness!

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Re: RAVP

#225699

Postby PrefInvestor » May 31st, 2019, 8:34 am

Kenny wrote:In my opinion, in the real-world, RAVP are irredeemable because it is the holders that have sole control over the timing of any redemption and in particular the option to block any attempt at redemption - indefinitely.


Hi Kenny, I for one would like to thank you for your "real world investing" input that in respect of RAVP (which I hold) I find reassuring. I am always interested in your posts on this particular pref as I know that you closely follow the fortunes of the company (and from your last post I can see why !).

ATB

Pref

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Re: RAVP

#225707

Postby GoSeigen » May 31st, 2019, 9:06 am

Kenny wrote:I am retiring from this exchange because I do not understand what it is about.

Well, full marks for honesty...
As for losing my shirt – I think I will console myself planning what to do with my quarterly dividend of £43,851.27 due from RAVP at the end of June.

Always best not to engage with madness!


The mad thing is that Kenny has made no comment at all as to the merits or otherwise of the issuer of this share. His only concern seems to be that he should never be able to have his capital returned!

Why should RAVP holders be so chuffed to participate in £12m of dividends last year, when the ordinary shareholders helped themselves to almost £50m? Why would holders wish to have no exit to their investment in a company that appears to be burning through £100m of cash per year with roughly £75m remaining as of Dec 2018? Does the falling prices of all its shares -- ordinary and preference -- not cause concern?

I've searched the entire forum and found a similar lack of comment. Can anyone explain why this is a good share to buy at the price?


GS

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Re: RAVP

#225708

Postby GoSeigen » May 31st, 2019, 9:08 am

PrefInvestor wrote:
Kenny wrote:In my opinion, in the real-world, RAVP are irredeemable because it is the holders that have sole control over the timing of any redemption and in particular the option to block any attempt at redemption - indefinitely.


Hi Kenny, I for one would like to thank you for your "real world investing" input that in respect of RAVP (which I hold) I find reassuring. I am always interested in your posts on this particular pref as I know that you closely follow the fortunes of the company (and from your last post I can see why !).

ATB

Pref


Please link to his "real world investing" posts which address the merits of this share. Thank you.

GS

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Re: RAVP

#225716

Postby OwenSwansea » May 31st, 2019, 9:35 am

Kenny, thou art a man of wisdom!

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Re: RAVP

#225726

Postby CryptoPlankton » May 31st, 2019, 10:14 am

GoSeigen wrote:
Kenny wrote:I am retiring from this exchange because I do not understand what it is about.

Well, full marks for honesty...

Oh my God! GS killed Kenny! :lol:

(Don't worry, I'm sure he'll be back in the next episode... )

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Re: RAVP

#225729

Postby Alaric » May 31st, 2019, 10:17 am

GoSeigen wrote: His only concern seems to be that he should never be able to have his capital returned!


Is his concern not that of every Preference Share investor, namely that when mathematically priced as a perpetuity and standing at a price above 100, the Company announces that it will be compulsory to accept 100 in lieu of the future income?

Forced repayment is a protection to Preference Share holders when the price is below 100, but not when it's above.

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Re: RAVP

#226266

Postby GoSeigen » June 2nd, 2019, 3:02 pm

GoSeigen wrote:
PrefInvestor wrote:
Kenny wrote:In my opinion, in the real-world, RAVP are irredeemable because it is the holders that have sole control over the timing of any redemption and in particular the option to block any attempt at redemption - indefinitely.


Hi Kenny, I for one would like to thank you for your "real world investing" input that in respect of RAVP (which I hold) I find reassuring. I am always interested in your posts on this particular pref as I know that you closely follow the fortunes of the company (and from your last post I can see why !).



Please link to his "real world investing" posts which address the merits of this share. Thank you.

GS


Okay, so there's only the quote above, which if written this real-world way is vaguely correct:

"RAVP are redeemable but it is the holders that have sole control over the timing of any redemption and, separately, the option to block any attempt at a capital reduction at par -- indefinitely until something else bad happens."


But for most(**) RAVP investors here, the "real world" RAVP seems to be little more than a black box which will pay its UK investors 8% pa for ever. The contrast with the parallel IPF discussion is instructive: investors there are worried about that they may NOT get their principal back. Here they worry that they WILL get their principal back.


hiriskpaul and DampSeaweed have dissented:

DampSeaweed - "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 ?"
hiriskpaul - "The fact that RAVP is redeemable is a good thing from the perspective of pref holders." [Emphasis in the original]. "the reason for the high yield can be summed up in one word - Russia, which I note has been dropped from the company name."


GS

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Re: RAVP

#226280

Postby GoSeigen » June 2nd, 2019, 4:05 pm

Alaric wrote:
GoSeigen wrote: His only concern seems to be that he should never be able to have his capital returned!


Is his concern not that of every Preference Share investor, namely that when mathematically priced as a perpetuity and standing at a price above 100, the Company announces that it will be compulsory to accept 100 in lieu of the future income?

Forced repayment is a protection to Preference Share holders when the price is below 100, but not when it's above.


As Alaric knows I've been the target of enough abusive denial of the above to believe that it is/was a rarely held concern of Preference Share investors. My detractors evidently felt that high preference share prices are a good thing, put into place to reward them for so cleverly choosing to invest in preference shares and that their holding is/should be unassailable, using faulty arguments about the meaning of redemption, for example. The fact that those shares are very expensive capital and being serviced in priority to other capital providers of the issuer is apparently of no concern to them -- when IMO it should be: an investor should be able to put himself in others' shoes and understand their motivations.

Now Kenny, like some other posters, was at least trying to quantify the risks. For that he is to be praised. The problem is, in all good faith, he didn't really understand the legal matters he was talking about (unprompted) and when the actual law and contract were put to him he seemed unwilling to replace the faulty model. Not unusual and his prerogative of course -- but then he kept posting back the same flawed message "RAVP is irredeemable" and the logically inconsistent "RAVP redemption requires a class vote". So I don't really understand what his concerns are -- we speak a different language -- and your guess is as good as mine.


The concern described above, has a flaw. No sober-minded, risk-averse investor should price preference shares as a perpetual without any discount for risk of failure or retirement. If a preference share price rises above par, then as with dated bonds, the holder should be compensated for the premium risk with a higher yield. If pref investors pay too high a price for their preference shares (i.e. to the extent they feel the yield has not compensated them for risk of loss) then that is entirely their fault. That was my main point with Aviva. If you bought Aviva preference shares a while back at around 120-125p, then you had a sensible yield which in 3 years might compensate for an at-par capital reduction, for example. Buying above 160p was being reckless. This is why I am reluctant for example to hold large quantities of BOI much above 200p: the yield is just not good enough for the risk and I'd much rather have the equity. BKIR share price is close to all time lows. Two scenarios: 1. equity is right, bonds wrong, result: the equity is toast but the bonds look no good either. 2. equity is wrong, bonds are right, result: bond yields may fall a bit but are already low yield; equity has significant upside AND and an incentive to find ways to eliminate the expensive debt.

So I think anyone buying prefs and pricing them like a low-risk perpetual bond [ref "bond-like shares"] is making a mistake, especially if they haven't even thought about the potential problems -- and if every pref investor still thinks that way as you suggest then maybe it's still a problem for the pref market.


GS

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Re: RAVP

#226309

Postby PrefInvestor » June 2nd, 2019, 6:14 pm

Hi All, Well I started investing in prefs around 2011 and by March 2018 I had just about doubled my money, but I took a hit from the Aviva events. Up until that time pretty well everybody believed that “irredeemable” meant perpetual, but then some clever lawyer advising Aviva came up with an interpretation of the prospectus that laid the whole pref market low.

What do I think about that, it’s unprintable, a disgusting betrayal of trust IMV. Lloyds ECNs Mark 2 IMV. You won’t be surprised to hear that I am on the investors side of this argument. They took people’s money when they wanted the capital and now they don’t need it anymore and it’s inconveniently expensive they want out.

In the end I understand that it was vested interest that made Aviva back down and even pay compensation. There were so many big companies holding their prefs that didn’t want to take a big loss AND held enough Aviva ordinary shares that the they were in the end persuaded that they could not win the necessary class vote. That’s my understanding of what happened anyway, if anyone knows better then do tell.

These days I am a lot more cautious with which prefs I am prepared to invest in. Most of those I have I bought in the mid 110s just in case the redemption issue should come up again. The one exception to that is RAVP where I have a slightly larger holding, but that is because I am well aware of the change to their articles of association to remove that risk. Yes I know they own and run Russian warehouses and even offices these days. But I ALSO know who holds most of the prefs ie Invesco and Neil Woodford’s company (and those two companies also hold most of the equity capital) AND the RAVP directors. If the company goes bust that’s one thing, but under ANY OTHER CIRCUMSTANCES I can’t see turkeys voting for christmas. The company was profitable up until the end of 2018 but then due to them transitioning to be ruble/euro basis their most recent results don’t look so good. Perhaps there is a risk there I’m not sure ATM.

So I hope it’s clear that I DO know quite a lot about the company, but nowhere near as much as Kenny does and I have been reading his posts about RAVP (was RUSP) for years.

Pref

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Re: RAVP

#226327

Postby PrefInvestor » June 2nd, 2019, 6:53 pm

Sorry my statement “The company was profitable up until the end of 2018 but then due to them transitioning to be ruble/euro basis their most recent results don’t look so good.” should have said 2017. The 2017 results published in March 2018 were profitable, it was the 2018 results published by Edison in March 2019 that were loss making.

Saw the error too late to correct the typo.

Pref

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Re: RAVP

#226377

Postby GoSeigen » June 3rd, 2019, 12:28 am

PrefInvestor wrote:So I hope it’s clear that I DO know quite a lot about the company, but nowhere near as much as Kenny does and I have been reading his posts about RAVP (was RUSP) for years.

Pref


His posts must be on another BB. Is it a secret or can you post a link or two?

Thx.

GS


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