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Co-op Group 11% 2025 (42TE)

youfoolishboy
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Re: Co-op Group 11% 2025 (42TE)

#29961

Postby youfoolishboy » February 8th, 2017, 4:52 pm

GoSeigen
How does your suggestion of waiting for the senior to stabilize before diving into the subs help if the most likely outcome going forward is an LME to stabilize the bank? I am confused by what you write.
I must admit I am feeling more inclined to follow my plan an sell my group ones, wait for the bank to announce an LME then buy the group back again which should have fallen in sympathy. Mind you there does now seem to be a connection with the pension plan between the bank and group that may turn out to have a large impact as pension plans tend to these days.

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Re: Co-op Group 11% 2025 (42TE)

#30044

Postby GoSeigen » February 9th, 2017, 12:04 am

youfoolishboy wrote:GoSeigen
How does your suggestion of waiting for the senior to stabilize before diving into the subs help if the most likely outcome going forward is an LME to stabilize the bank? I am confused by what you write.


Why do you think an LME is most likely going forward? And if it were, would that not be a good time to buy the subs? If not, why not?

There is a lot of negativity surrounding Co-op right now. I'm already buying the subs in very small tranches, having dumped them all last year at around 110. Like many have large exposure to senior, so would be painful to have more than a 10%-or-so haircut on them.

I must admit I am feeling more inclined to follow my plan an sell my group ones, wait for the bank to announce an LME then buy the group back again which should have fallen in sympathy. Mind you there does now seem to be a connection with the pension plan between the bank and group that may turn out to have a large impact as pension plans tend to these days.


If you're worried then sell: prices haven't dropped much, so when your fears materialise you should be quids in. I sold our group bonds late last year, more because I felt they were fully priced than for any tactical reasons, but I have no urge to repurchase at current price levels...


GS

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Re: Co-op Group 11% 2025 (42TE)

#30057

Postby youfoolishboy » February 9th, 2017, 7:24 am

GoSeigen wrote:
youfoolishboy wrote:GoSeigen
How does your suggestion of waiting for the senior to stabilize before diving into the subs help if the most likely outcome going forward is an LME to stabilize the bank? I am confused by what you write.


Why do you think an LME is most likely going forward? And if it were, would that not be a good time to buy the subs? If not, why not?

There is a lot of negativity surrounding Co-op right now. I'm already buying the subs in very small tranches, having dumped them all last year at around 110. Like many have large exposure to senior, so would be painful to have more than a 10%-or-so haircut on them.

I must admit I am feeling more inclined to follow my plan an sell my group ones, wait for the bank to announce an LME then buy the group back again which should have fallen in sympathy. Mind you there does now seem to be a connection with the pension plan between the bank and group that may turn out to have a large impact as pension plans tend to these days.


If you're worried then sell: prices haven't dropped much, so when your fears materialise you should be quids in. I sold our group bonds late last year, more because I felt they were fully priced than for any tactical reasons, but I have no urge to repurchase at current price levels...
GS


I read Mark Taber's discussion boards and his view on the subject is below and if he thinks an LME is looking very likely I would tend to believe him as there is nobody outwith the Wise that knows more than he on the CO OP bank finances and situation.
“The only potentially feasible plan I can come up with is a Liability Management Exercise to exchange all of the Bank’s subordinated bonds into equity and the 2017 senior bond into a new Tier 2 bond with maturity extension and coupon uplift. That would generate about £450 million of CET1 capital and about £400 million of Tier 2 capital.”

I am going to sell my holding in the group now, I was looking here to see what the mood of other holders was and to see if I had missed anything obvious but after sleeping on it a couple of nights I have come to the conclusion the best way forward for me is to exit with a nice profit and look to buy back on any significant downward movement, no downward movement then I can buy back in at a later date as it is not going to move that far upwards. I lost profits on the COOP Bank subs due to waiting too long to exit a few months ago I will not make the same mistake twice.
Good luck on your buying the bank subs, braver man than me.

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Re: Co-op Group 11% 2025 (42TE)

#30304

Postby youfoolishboy » February 10th, 2017, 7:33 am

BreakTheBank wrote:youfoolishboy - I agree a debt for equity swap looks on the cards in which case small holders of the subs need to be very wary. Getting lumped with a chunk of unlisted, illiquid equity which most retail brokers cannot hold or trade and is only traded amongst hedge funds would be a nightmare. Well worth reading the thread you quote


I registered on Mark's site when TMF stopped but dont have much to add to the conversation there that has not been said. I brought the coop group issue up here as this thread had a lot of holders on it so thought it would be best place to chat about them.

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Re: Co-op Group 11% 2025 (42TE)

#31117

Postby youfoolishboy » February 13th, 2017, 7:16 am

Want to buy a bank? Going cheap all offers considered.
http://www.londonstockexchange.com/exch ... 25092.html

"The Bank has always been clear that, although it meets its Pillar 1 regulatory capital requirements and expects to continue to do so, it needs to build its capital and meet longer term UK bank regulatory capital requirements. Its capacity to do so organically has been constrained by the impact of interest rates that are lower than previously forecast, reducing the Bank's ability to generate income, and by higher than anticipated transformation and conduct remediation costs. The Bank has also needed to consider enhanced regulatory capital requirements expected of all UK banks, including MREL requirements.

As a result, and having concluded its annual planning review, the Board is today commencing a sale process, inviting offers for all of the issued ordinary share capital of the Bank, and is also considering ways to raise equity capital from existing and new capital providers and a potential liability management exercise of its outstanding public debt. The Board has engaged BofA Merrill Lynch and UBS Investment Bank for both of these activities and will continue to engage and consult with the Bank's shareholders.

The sale process and review of the Bank's outstanding liability structure have been discussed in full with the Prudential Regulatory Authority (PRA)................

Sales process

The Board is today announcing a formal sale process of The Co-operative Bank (as defined in the Takeover Code) to solicit proposals for the acquisition of 100% of the share capital of the Bank.

The Takeover Panel has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Code such that interested parties will not be required to be publicly identified as a result of this announcement and will not be subject to the 28 day deadline referred to in Rule 2.6(a), for so long as they are participating. Interested parties should note Rule 21.2 of the Code, which prohibits any form of inducement fee or other offer related arrangement, and that the Bank has not requested any dispensation from this prohibition under Note 2 of Rule 21.2 at this stage."

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Re: Co-op Group 11% 2025 (42TE)

#31121

Postby Wizard » February 13th, 2017, 8:02 am

Given this thread is on CoOp Group I put up a new thread on the Bank sale. But, is it correct that CoOp Group still owns 20% of CoOp Bank? I thought there was a link to continued CoOp Group involvement and use of the CoOp name, is that correct? And what, I wonder, might Group do with the proceeds of the sales if one goes ahead?

Terry.

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Re: Co-op Group 11% 2025 (42TE)

#31127

Postby youfoolishboy » February 13th, 2017, 8:42 am

Wizard wrote:Given this thread is on CoOp Group I put up a new thread on the Bank sale. But, is it correct that CoOp Group still owns 20% of CoOp Bank? I thought there was a link to continued CoOp Group involvement and use of the CoOp name, is that correct? And what, I wonder, might Group do with the proceeds of the sales if one goes ahead?

Terry.


Yes still owns 20% but have written down the value on their accounts significantly considering the coop bank share price has gone from something like £3 to 40p since issue I am not surprised. The concern I have is the pension fund is still linked and its difficult to get an idea on what will happen to coop group if the bank fails however that looks less likely now as there is a plan in place to sell the bank or do an LME. I will wait before buying back into the group until the full game plays out.

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Re: Co-op Group 11% 2025 (42TE)

#31176

Postby Wozzitworthit » February 13th, 2017, 10:59 am

Sold half of our 42TE/TF investment last week for same reason as youfoolishboy outlines above (the pension link up was the tipping factor)

We are also planning to buy back (probably as 42TF) depending on how all this pans out - maybe we will be able to pick up a bit cheaper, if not "c'est la vie" as we say in the UK

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Re: Co-op Group 11% 2025 (42TE)

#41105

Postby Surerera » March 24th, 2017, 2:05 pm

Several "credible" parties have expressed their interest in buying the Co-operative Bank, the lender said today.

http://www.cityam.com/261640/co-operati ... =dvTwitter

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Re: Co-op Group 11% 2025 (42TE)

#44181

Postby SteMiS » April 6th, 2017, 6:57 pm

There's a claim on Advfn that the Group has given guarantees and indemnities to the Bank as part of the 2013 restructuring, as disclosed in the 2013 Restructuring Agreement. I cannot find the 2013 Restructuring Agreement online and there doesn't seem to be anything in the Group Report and Accounts so I'm sceptical but does anyone know anything about this?

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Re: Co-op Group 11% 2025 (42TE)

#59614

Postby GrahamPlatt » June 12th, 2017, 7:09 pm

GS,

You were arguing so well. Then 10.
I'm afraid that's a fail.
Sorry.

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Re: Co-op Group 11% 2025 (42TE)

#95654

Postby hiriskpaul » November 14th, 2017, 4:48 pm

Just over a year since I started this thread and today was quoted 131p for 10k nominal 42TE. That is 1p up over the year and yield is now down to 6.04%. Rather than reduce, which I was contemplating last year I actually bought more during the Co-op bank induced wobble!

The interims showed the important parts of the Group (food/funerals) to be profitable with insurance showing a small, but not unexpected, loss. I note that the Group has sold its remaining stake in the Bank, so at least that can do no more damage. The NISA shareholders have agreed the £137m takeover offer, but still needs CMA approval. As a subordinated bondholder I think I would prefer to see the Group reduce its debt, but this is probably an excellent strategic move for them if they can pull it off.

Same issue as last year with these - although I am overweight I cannot think of a better place for the money right now and reckon the yield will keep edging downwards, so will probably hold on for another year at least. Unless the yield drops substantially.

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Re: Co-op Group 11% 2025 (42TE)

#95717

Postby hiriskpaul » November 14th, 2017, 7:10 pm

As the Tesco/Booker deal has been waved through I would now be very surprised if the CMA blocked the Coop/NISA takeover.

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Re: Co-op Group 11% 2025 (42TE)

#105496

Postby Shinyuk » December 21st, 2017, 9:30 am

I’m in sync with you on this at the moment Paul. I’m holding both 42TE and 42TF at the moment and can’t see a reason to sell presently. Incidentally, I expected the 42TF instalment to be paid by now but the share price remains unmoved and payment is still outstanding.

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Re: Co-op Group 11% 2025 (42TE)

#105504

Postby johnhemming » December 21st, 2017, 10:03 am

I hold 42TE. I am not quite sure how to compare them to the permanents. My rough stab at a calculation for a redemption yield (estimated without using technology beyond a pen, because I cannot find one on HL or ADVFN) is about 5.5-6%. There are, however, questions about the net present value of the dividend stream that makes a simple cash calculation slightly misleading. There is I presume a bit of space for a reduction in yield, but they appear to be substantially in line with other fixed interests if slightly higher on the yield side.

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Re: Co-op Group 11% 2025 (42TE)

#105543

Postby hiriskpaul » December 21st, 2017, 12:45 pm

I hold 42TE in an iWeb ISA and in my HL SIPP. Both have now paid the coupon, iWeb paying yesterday which is fairly miraculous as iWeb can be very slow in paying bond interest. I hold a small number of 42TF at HL as well, but have not yet received payment. 42TF is peculiar and has always been difficult to get hold of. 42TE is the biggest holding in my SIPP, about 25% by value, and with a running yield of about 8.6% this produces a substantial amount of the annual SIPP income.

Online quotes for 10k nominal 42TE, for settlement 27/12, are 133.5 to buy/129.62 sell, implying yield to maturity (using the excel YIELD() function) of 5.66%/6.18% respectively. Both above similar perpetual bank and insurance prefs, but similar to some PIBS. IMHO there is a good chance of further yield reduction to come on this one, so I have no intention of selling.

Impossible to get online quotes for 42TF, but a deal for 100k nominal went through today at 6.86p, implying ytm of 7.5% if that included the due payment, or 3.56% if it does not. I suspect the 3.56% is probably correct as payment was due yesterday, although that yield seems too low to me and I would sell at that - will try to get a XD price later. I find the easiest way to price 42TF is to lay out the cash flows in excel and simply use the XIRR() function.

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Re: Co-op Group 11% 2025 (42TE)

#105546

Postby johnhemming » December 21st, 2017, 1:03 pm

I had the coupon yesterday in my Charles Stanley account which I think is the first possible date (being the anniversary).

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Re: Co-op Group 11% 2025 (42TE)

#105559

Postby hiriskpaul » December 21st, 2017, 2:43 pm

Regarding 42TF, I had a chat with the HL dividend team and they say that they have not yet received the cash for it, but would have expected to by now. I received a firm sell quote for 250k nominal of 6.4, implying a XD yield to maturity of 5.27%. The dealer seemed incapable of confirming whether this was an XD price or not, but I think it must be, otherwise the yield would be 9.72%. 5.27% is not enough to tempt me to sell though as I like the short duration and the diversification from financials. Had they offered 6.5 (ytm 4.88%) I probably would have taken it.

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Re: Co-op Group 11% 2025 (42TE)

#106182

Postby Wizard » December 26th, 2017, 12:57 pm

hiriskpaul wrote:I hold 42TE in an iWeb ISA and in my HL SIPP. Both have now paid the coupon, iWeb paying yesterday which is fairly miraculous as iWeb can be very slow in paying bond interest. I hold a small number of 42TF at HL as well, but have not yet received payment. 42TF is peculiar and has always been difficult to get hold of. 42TE is the biggest holding in my SIPP, about 25% by value, and with a running yield of about 8.6% this produces a substantial amount of the annual SIPP income.

Online quotes for 10k nominal 42TE, for settlement 27/12, are 133.5 to buy/129.62 sell, implying yield to maturity (using the excel YIELD() function) of 5.66%/6.18% respectively. Both above similar perpetual bank and insurance prefs, but similar to some PIBS. IMHO there is a good chance of further yield reduction to come on this one, so I have no intention of selling.

Impossible to get online quotes for 42TF, but a deal for 100k nominal went through today at 6.86p, implying ytm of 7.5% if that included the due payment, or 3.56% if it does not. I suspect the 3.56% is probably correct as payment was due yesterday, although that yield seems too low to me and I would sell at that - will try to get a XD price lateer. I find the easiest way to price 42TF is to lay out the cash flows in excel and simply use the XIRR() function.

My bold.

Embarrassing question, but can somebody remind me how 42TF works and what the cash flows are?

Terry.

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Re: Co-op Group 11% 2025 (42TE)

#106191

Postby genou » December 26th, 2017, 2:38 pm

can somebody remind me how 42TF works and what the cash flows are?


It pays 1 penny on 20/12/18, and each December until 2025, at which point it expires worthless. So 8p still to pay.


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