Co-Op 42TF

[Laughton]

I know I should have known the answer before I purchased the last small top up in these but I thought I did but now I'm not so sure so hopefully someone here will know. I'm quite prepared to be told that I got it wrong.

Anyway, I purchased a few more of these on December 2nd thinking that I would be entitled to the December 20th 1p per note payment. I received payment on those I'd been holding for some time but not on this latest purchase.

I've finally managed to get hold of the original prospectus the relevant sections of which say:

"C.5 - Transferability: Not Applicable. There are no restrictions on the free transferability of the Notes provided that no Noteholder may require the transfer of a Note to be registered during the period of 15 days ending on the due date for payment of principal or interest on that Note."

and

C.9. - Interest/Redemption: Redemption Unless redeemed or purchased and cancelled earlier, the Instalment Repayment Notes will be redeemed in twelve equal instalments. The first instalment will fall due on the first anniversary of the Issue Date and the final instalment will fall on the twelfth anniversary of the Issue Date.

The Issue Date is not specifically set out in the Prospectus but the Settlement Date/Scheme Setlement Date specified was/is December 20th 2013. I assume this is the same as the Issue Date as all payments since then have been made on December 20th.

My assumption was that a purchase made on December 2nd fell outside the period of 15 days ending on December 20th, being the due date for payment. But maybe I'm wrong.

Anyone here able to tell me the definitive answer?

[princepaul]

A purchase on Dec 2nd would be for settlement on Dec 6, so you would have traded "xd" (without the right to receive the next interest payment). However, you would not be worse off financially as you should have received a small reduction in the price due to negative "accrued interest" rather than a having to pay for a relatively large amount of accrued interest if you had traded a few days before. You should check this is the case on your contract note.

[Laughton]

Ah, I see now that Settlement was on December 5th.

So, clutching at straws here, is December 5th "during the period of 15 days ending on the due date for payment" (December 20th)?

[GoSeigen]

Should be obvious from the amount the OP paid. If it was around 3.5-3.6p then it was before the ex date. If the price was around a penny lower than that then it was post ex date.

No accrued interest on this one BTW. The payments are capital repayments, after each payment the principal outstanding reduces.

GS

[Laughton]

Should be obvious from the amount the OP paid. If it was around 3.5-3.6p then it was before the ex date. If the price was around a penny lower than that then it was post ex date.

Why? The price paid was what the MM was prepared to sell it for and what the buyer was prepared to pay. I'm quite prepared to accept that I was an idiot and overpaid becasue I got my dates wrong and that the MM was clever in selling ex the payment thereby gaining twice (the spread and the payment).

I paid 3.6p

[GoSeigen]

Should be obvious from the amount the OP paid. If it was around 3.5-3.6p then it was before the ex date. If the price was around a penny lower than that then it was post ex date.

Why? The price paid was what the MM was prepared to sell it for and what the buyer was prepared to pay. I'm quite prepared to accept that I was an idiot and overpaid becasue I got my dates wrong and that the MM was clever in selling ex the payment thereby gaining twice (the spread and the payment).

I paid 3.6p

The assumption is that both buyer and seller are reasonably intelligent and self-interested. Within those assumptions mistakes can be made.

If you paid 3.6p then you should be due the 1p payment.

If you are not entitled to it then that to my mind means there was a manifest error in pricing of the trade; I would check the contract note carefully and then put it to the broker and insist they check whether the ex date was correctly applied. You can point out that you were simply confused about the ex-date and perhaps the counterparty was too. Obviously the mistake favours the counterparty but that doesn't lessen the point that the price was wrong -- after ex-date buyers were no longer entitled to the upcoming payment so why would they still pay 1p extra if aware of all the facts? [And remind the broker that he has a duty of care, including to make clear to you whether the deal is ex-payment or not.]

Good luck fighting your corner.

GS
P.S. You should act quickly, explaining that you only discovered the error when you recently noticed you hadn't received the distribution. The longer you delay the weaker your prospects become.

[hiriskpaul]

Should be obvious from the amount the OP paid. If it was around 3.5-3.6p then it was before the ex date. If the price was around a penny lower than that then it was post ex date.

Why? The price paid was what the MM was prepared to sell it for and what the buyer was prepared to pay. I'm quite prepared to accept that I was an idiot and overpaid becasue I got my dates wrong and that the MM was clever in selling ex the payment thereby gaining twice (the spread and the payment).

I paid 3.6p

The assumption is that both buyer and seller are reasonably intelligent and self-interested. Within those assumptions mistakes can be made.

If you paid 3.6p then you should be due the 1p payment.

If you are not entitled to it then that to my mind means there was a manifest error in pricing of the trade; I would check the contract note carefully and then put it to the broker and insist they check whether the ex date was correctly applied. You can point out that you were simply confused about the ex-date and perhaps the counterparty was too. Obviously the mistake favours the counterparty but that doesn't lessen the point that the price was wrong -- after ex-date buyers were no longer entitled to the upcoming payment so why would they still pay 1p extra if aware of all the facts? [And remind the broker that he has a duty of care, including to make clear to you whether the deal is ex-payment or not.]

Good luck fighting your corner.

GS
P.S. You should act quickly, explaining that you only discovered the error when you recently noticed you hadn't received the distribution. The longer you delay the weaker your prospects become.

I completely agree with this. 3.6p makes no sense if you were not entitled to the 1p payment. It would mean the stock was trading on a negative yield. I would particularly emphasise the part I have put in bold.

[Laughton]

Sorry, I never did come back on this to report that iDealing credited me with the "missing" £500 payment.

Company report out today. Big holdings of 42TF and 42TE and I feel relaxed that they will stay the course and be able to make final payments:-

https://www.co-operative.coop/media/new ... ew-members

[hiriskpaul]

Yes, another robust set of results. Noteworthy this time is the drop in net debt by about one third.

Could not get online prices for the 11% from Hargreaves Lansdown today for some reason. Mid price looks attractive though. I think I hold enough anyway.

[BondSquared]

How does everyone feel about 42TF taxation? Brokers tend to - IMV - incorrectly report interest income on it when issuing tax certificates, when all cashflows are capital repayments.

[Surerera]

There has been no online offer in 42TE with idealing for quite a while, 104.55 bid for 50k though.

[Borderline]

Net Debt has dropped from £920m in 2021 to £333m, which is a drop of more than a third methinks.
Good to see they have used the proceeds from the sale of the petrol forecourts business to pay down debt and I should think they will be more than happy to get rid of 42TE and 42TF when the time comes.

[Mrbond]

Be grateful if someone be able to post a link (prospectus) for 42TE and 42TF

Many thanks

[Laughton]

Well, I have the one for 11 per cent. Final Repayment Subordinated Notes due 2025 but can't remember where I got it from. It's quite a big file so how do I share it or get it on here (me being old and not that computer literate and all)?

[Borderline]

If you type the following in to Google,

cooperative group 11% final repayment subordinated notes prospectus

you should get a link to the London Stock Exchange pdf with all the info

Good luck

[Laughton]

Maybe I've learnt how to do something new - try:-

https://drive.google.com/file/d/11V8Y3w ... share_link

[Mrbond]

"Loughton"

Thanks

[hiriskpaul]

Net Debt has dropped from £920m in 2021 to £333m, which is a drop of more than a third methinks.
Good to see they have used the proceeds from the sale of the petrol forecourts business to pay down debt and I should think they will be more than happy to get rid of 42TE and 42TF when the time comes.

Quite right, I misread that yesterday.

They are awash with cash now - enough to redeem the 2024 and 2025 debt, but curiously only chose to buy back £100m of the £300m 2024 bond in the recent tender. I wonder whether they held back becasue they are considering tendering for the 11% 2025 (42TE)? Personally I am happy to hold to maturity, unless they offered a yield below 6% as I would find such a low risk bond hard to replace. Now would be a good time for them to do this though as shorter term rates are quite high.

One potentially expensive problem is this one (p.207), which had already been announced:

b) ii) In early February 2023 a claim was issued against Co-operative Group Limited and certain of its subsidiaries (Co-operative Group Food Limited,
Co-operative Foodstores Limited and Rochpion Properties (4) LLP) by the liquidators of The Food Retailer Operations Limited in connection with
transactions which took place in 2015 and 2016 relating to the Somerfield supermarket business acquired by Co-op in 2009.
The amount claimed is approximately £450m plus further unquantified amounts of interest and costs. Co-op strongly disputes both liability and
quantum of the claim and the claim will be vigorously defended.

[Zow1]

CGT on 42TF

Hi all,

I think this was discussed many years ago on a forum but i cannot find the information.
Basically i have recently changed accountant and the new guy is concerned that the previous accountant has been stating the income from these bonds incorrectly. He had been stating the 1pence income per year as capital gain on a share.....which is incorrect on at least two counts - it is not capital gain and it is not a share.
Does any one know definitively how these should be handled?

Many thanks

(As an a secondary question, does any one know if/how it is possible to sue an accountant for incompetence/negligence? You hear of doctors being sued all the time but accountants not so much. The only one that comes to mind is Grant Thornton vs Manchester BS)

[GoSeigen]

CGT on 42TF

Hi all,

I think this was discussed many years ago on a forum but i cannot find the information.
Basically i have recently changed accountant and the new guy is concerned that the previous accountant has been stating the income from these bonds incorrectly. He had been stating the 1pence income per year as capital gain on a share.....which is incorrect on at least two counts - it is not capital gain and it is not a share.
Does any one know definitively how these should be handled?

Many thanks

(As an a secondary question, does any one know if/how it is possible to sue an accountant for incompetence/negligence? You hear of doctors being sued all the time but accountants not so much. The only one that comes to mind is Grant Thornton vs Manchester BS)

Sorry, but how is the new accountant determining that the payments are interest? They are repayments of principal surely, there is no interest payable on the notes, they are amortising zero-coupon notes (see the OP), so any amount received is a payment of capital value. However assuming they are QCBs these should not be subject to capital gains tax either so unless I am very much mistaken there is never any tax to pay or transactions to declare. (If they were exchanged for old preference shares then there would have been a capital gains-eligible disposal at the time of the exchange.)

GS