Tender offers Bristol & West prefs and BOI pibs

[GrahamPlatt]

Well, that does seem to be the case with the institutions, 56.12% of whom neither tendered nor voted.

.... struggling to reconcile that statement with my (non-institutional) personal bond holding ... the above implies that 100% of the outstanding principal is held by institutional investors.
- yes.

Tendering.

Oh. A nuance that I have missed then. I thought the figures related only to institutional holdings.

[GoSeigen]

By my calculations retail vote now needs to have 43-44% of the remaining holders voting against in order to block the redemption. That's not 43% of those voting, that's 43% of all the bonds held by PIs -- so for example if only 50% of holders vote then 86% of those voting would need to be against the redemption motion in order to block it.

I can't see that realistically happening.

GS

[BobGe]

Of the total institutional votes cast:
20,009,811 voted in favour, 135,000 voted against, 20,144,811 total number that voted
In other words, more or less all of them voted for. This should give some indication to retail holders that it is a "no brainer".

In which case, for those enjoying the perpetual income, isn't the actual 'no brainer' position not to tender but to be sure to vote "against" (thus securing the add'l 2% voting premium) and sit back and see what happens?

[BobGe]

The following list of alternatives with approx current yield might be helpful for those considering what to do. These yields ought to be borne in mind when considering BoI are taking out holders at <7%:

AV.B 7.45%; AV.B 7.3%; ELLA 7.2%; GACA 7.85%; GACB 7.8%; LLPC 7.35%; LLPD 7.35%; NWBD 7.3%; SAN 8.15%; STAC 8%.
Coop 42 TF 10.4%; Coop 42 TE 8.2%. (2025)
Coventry PIBS 8.1%; Leeds PIBS 7.9%; Newcastle PIBS 7.7%; Nottingham PIBS 7.8%; Skipton PIBS 8.2%

Not sure about the PIBs but in terms of alternatives (i.e. replacement for BOI perpetual, if it gets taken out) the future longevity of the prefs is somewhat uncertain and the Co-op's haven't long to go.

Sure, as BondSquared pointed out, BOI isn't a pension but in terms of a simple buy, hold and 'clip the coupon' position it must be well up on the 'no brainer' list.

[88V8]

According to CBonds there are £45,903,000 outstanding so the 66.7% threshold is 30,600,000 of which they already have 20,009,800 and need another 10,600,000 from the 25,900,000 or so not voted nor tendered.

Which doesn't get us very far as we don't know the PI holding nor the number not tendered by instos.

Anyway, I shall tender mine, and if there is a rump I expect I may be able to buy them back at 160p or so in a month's time.

V8

[88V8]

...isn't the actual 'no brainer' position not to tender but to be sure to vote "against" (thus securing the add'l 2% voting premium)...

However one votes, one only gets the 2% if the resolution goes through.

V8

[BobGe]

Quite so. I could not think of a better word to use than 'securing' in the moment, although there probably is one...

[BobGe]

According to CBonds there are £45,903,000 outstanding so the 66.7% threshold is 30,600,000 of which they already have 20,009,800 and need another 10,600,000 from the 25,900,000 or so not voted nor tendered.

Which doesn't get us very far as we don't know the PI holding nor the number not tendered by instos.

Anyway, I shall tender mine, and if there is a rump I expect I may be able to buy them back at 160p or so in a month's time.
V8

That 2nd para suggests you aren't so keen to loose them? There will be no rump unless the vote fails. The institutions have already tendered (which is a vote in favour of redemption), if you tender you will add to that, which reduces the likelihood of any rump. Even if it fails, where is the rump liquidity going to come from? Who will be left holding? Will there be sellers at 160p?


As an aside:
AIUI Institutions usually accept fair tender offers and this one is so small I don't suppose it even got much in the way of thought. I doubt any would remember the GFC history either but reality is they all owe a debt of gratitude for the benefit they have received since to 'retail'. If it was not for the efforts of 'retail' (OBR etc.) in all probability these would have long ago been wiped out with accompanying capital losses for all holders, institutions and retail alike. But in the real world, we should hardly be surprised at the reaction of any institutional holders and the tender results published yesterday. To them it's just seen as being offered £1.00 for 85 pence. Would you tell the boss you didn't feel you should take the money?

[Laughton]

Even if it fails, where is the rump liquidity going to come from? Who will be left holding? Will there be sellers at 160p?

Presumably would be left waiting for holders to die and their estates having to sell or preferring the cash. There won't be any living holders selling - having turned down 190p they must be happy with the yield and know it's "forever"- or until BOI decide to offer more to avoid the hassle.

[FrankSeymour]

These Bonds were over the counter bonds issued to members of the Bristol and West Building Society.
The are perpetual retail bonds.
It is a shame the institutions crashed the issue over the years.
The Issue is a small rump now for the Bank of Ireland.
Having taken out the institutions there will be only £25 million held by retail customers.
Many like me rely on the income to fund my retirement.
Since the Bank can decide to redeem any or all Bonds, I hope they will choose to leave the
pensioners alone.
£25 million in bonds not qualifying for capital is nothing in the scheme of things.

I shall be voting NO as will many of my elderly relatives.

[BobGe]

It is a shame the institutions crashed the issue over the years.

Perhaps not surprising given the yields at which other BKIR paper traded during the years of ZIRP.

Since the Bank can decide to redeem any or all Bonds, I hope they will choose to leave the
pensioners alone.

The tone would seem to be that they will redeem all tendered and their desire is to redeem the outstanding in its entirety, so maybe that's wishful thinking. However, overall it's a very fair offer given they were probably not greatly more aware of the distribution than any of us. For those holders who would like to retain the bond in perpetuity the only choice is not to tender but to be sure to vote against, then just keep fingers crossed. *

* (One hopes that for those with nominee positions their respective brokers don't make a hash of it. There is also the matter of nominees themselves voting any holdings 'for' where the holder themselves does not respond..., e.g. a default option.)


Given that there was no obvious noise amongst retail holders calling for a tender offer or redemption before the announcement it's probably fair to say there were not many looking to divest of their holdings prior.

Frankly I could tender mine and lock in a fat capital gain, after all who knows were interest rates may end up and for how long, but, given the background, I'm strongly erring towards supporting those who would wish to keep these bonds by voting against. If the motion to redeem is passed I end up in exactly the same position as I would be had I tendered. If the motion fails I'm in no worse position than I was before the announcement and can continue to clip the coupons (and I might guess the quote will remain strong for the reduced outstanding), content in the thought that I've stood up for others now as others stood up for the rest of us when the Irish Gov't proposed to confiscate them around 12 years ago.

Who knows, maybe others thinking of tendering may find time to reflect...

[Bern]

If you tender for BOI you are trading in an asset paying 7.7% pa (at sell price just before announcement) in perpetuity for a one off gain of 12.4% (190 - sell price just before announcement (you would have got the accrued anyway)).

And with Aviva San NWBD and the rest of them looking on this will likely create the going rate for take outs. In fact BOI is one of the more difficult ones for them requiring a substantial majority vote of just this asset holders.

In a few years this might look to be close to the interest rate peak, and the FI asset class trough. Indeed 5-6% is not normal for European interest rates and I wouldn't have thought we would be out of line forever.

So I'll vote no.

[Jwdool]

If you tender for BOI you are trading in an asset paying 7.7% pa (at sell price just before announcement) in perpetuity for a one off gain of 12.4% (190 - sell price just before announcement (you would have got the accrued anyway)).

And with Aviva San NWBD and the rest of them looking on this will likely create the going rate for take outs. In fact BOI is one of the more difficult ones for them requiring a substantial majority vote of just this asset holders.

In a few years this might look to be close to the interest rate peak, and the FI asset class trough. Indeed 5-6% is not normal for European interest rates and I wouldn't have thought we would be out of line forever.

So I'll vote no.

I don't think this analysis is sound. The take out rate is 190 (inc the bonus) clean, which translates into ~7%. The bonds themselves are subordinated securities, so the appropriate comparator are other subordinated securities - of which there are many available at better rates of interest. For those interested in the long end, it is now possible to buy 30 year gilts at ~4.4%, which eliminate credit risk at a cost of around 2.6% (a very attractive, narrow spread, historically speaking). Of course there is other paper out there that holders could take advantage of, so for this reason I think the offer is fair and highly likely to go through. It is true the BoI is a good institution, but at the same time, the market price of these assets had been in line with other similar instruments (still available). For this reason holders would need to justify why they wouldn't simply opt for the plentiful alternatives in their portfolio - even if this means adopting lower risk, lower yielding paper (including gilts, Senior (long dates) or even other Tier 2) with a negligible drop in income and in some cases a pick up in yield (for similar rated paper).

[BobGe]

The take out rate is 190 (inc the bonus) clean, which translates into ~7%. The bonds themselves are subordinated securities, so the appropriate comparator are other subordinated securities - of which there are many available at better rates of interest.

...holders would need to justify why they wouldn't simply opt for the plentiful alternatives in their portfolio - even if this means adopting lower risk, lower yielding paper (including gilts, Senior (long dates) or even other Tier 2) with a negligible drop in income and in some cases a pick up in yield (for similar rated paper).

Care to give some real life examples? Preferably 'non-complex' instruments.

[Jwdool]

You can find all the gilts along with yields here:
https://www.yieldgimp.com/gilt-yields

Retail range of corporate bonds can be found here:
https://www.hl.co.uk/shares/corporate-b ... /gbp-bonds

I've previously posted a selection of PIBS and Prefs on this thread along with yields (which are priced around the same).

[BobGe]

Thank you and I'm aware of those lists and have revisited but I seem to be struggling to find the "many available at better rates of interest", well, not with similar level of 'risk' anyway. From what you wrote I thought you might have some specific suggestions in mind?

[JohnEdwards]

My concern is that, if this is successful, it will encourage all the other issuers in this shrinking universe to embark on the same plan - so there will eventually be no alternatives. We need to man the barricades!

[FrankSeymour]

I shall be voting NO.
This is one of the last few Perpetuals left.
Looking around there is nothing offering the same rate, and there would be buying costs.
I am too old ( over 75) to take a pension out and rely on bonds and preference shares to top up my income.
Annuities mean surrendering capital to the insurance companies.
My children and grand children will inherit the bonds, if they are not forcibly redeemed.

HL have a corporate action up on their website, it does not however cover attendance at the meeting nor the appointment of Proxies.
A relative holds BOI in certificated form and has a paper response form which covers proxies.
II has absolutely nothing, no response to email queries either
After the usual telephone battle over several days and musak blaring in both my ears, on the third day I got through on the phone, Customer Service at II had no idea about a corporate action, but called back later saying their team where aware and "were working on it".
Hooray.

I wonder what the results will be, are NWBD and LLPC next I wonder.
There seems to have been a small institutional response to the BWSA 8 1/8 issue maybe they will survive. ???

[PeterGray]

After the usual telephone battle over several days and musak blaring in both my ears, on the third day I got through on the phone, Customer Service at II had no idea about a corporate action, but called back later saying their team where aware and "were working on it".
Hooray.

I had a quick reponse to a secure message to ii this morning (generally more efficient than phoning). They said they had been waiting for the event to be updated to Crest, which has now happened. They are validating their notice and expect the corporate action to be in my acc in the next day or two.

[GoSeigen]

I wonder what the results will be, are NWBD and LLPC next I wonder.

NatWest have already made a tender offer for NWBD.

The rump is now trading some 30% below the tender price.

EDIT: Here's a typical comment from the NWBD tender:

"I am also not very interested in selling at 175. It is difficult to find other investments where the yield is so good and the risk is comparatively low.

I would probably accept an offer at 225, giving a yield of 4%, but even then it would be quite difficult replacing the income with a comparatively low risk."

and

"Inflation may be on the increase but there is no sign at all of any meaningful rises in interest rates in the UK, Europe, or in the US.

It will be several years I think before interest rates are even back at 2%."


GS