The Lemon Fool

· holders of £37,605,200 of the Issuer's existing sterling notes due 14 December 2023 have elected to exchange them into the same amount of new 12 per cent. notes due 12 December 2027, pursuant to the exchange offer announced on 15 November 2022 (the "Exchange Offer"); and
· an additional £12,394,800 of new notes will be issued for cash as Cash Offer New Notes (as defined below) (of which, £9,775,000 of Cash Offer New Notes will be retained in treasury by the Issuer, for possible sale in the future).

The net effect is:
·prior to the Exchange Offer and new issue, the Issuer had £78,100,000 sterling notes maturing 14 December 2023;
·once the Exchange Offer and new issue settle, the Issuer will have £40,494,800 sterling notes maturing 14 December 2023 and (excluding for these purposes those notes retained in treasury) £40,225,000 sterling notes maturing 12 December 2027, and will receive £2,619,800 of gross cash proceeds; and
·the total size of the issue of New Notes (including those retained in treasury by the Issuer) is £50,000,000.



The outcome seems about right to me. The coupon wasn't especially attractive by reference to the return on the euro debt.

I elected to exchange all mine. I'm happy enough with the coupon all things considered especially since I don't carry the exchange rate risk.

I do not expect them to open at a premia or if so only a tiny amount.

Do you have any idea when the new notes will be available for purchase?

MickR wrote:Do you have any idea when the new notes will be available for purchase?

They're listed now, so depends on one's broker.

Gan020 wrote:I do not expect them to open at a premium or if so only a tiny amount.

Amazingly to me, it seems you are right.

V8

Isn't 12% in too good to be true territory?

I tendered all mine as well. I was hoping for a higher take up, but this should do.

BullDog wrote:Isn't 12% in too good to be true territory?

In the current market, with the risks involved, I would say they pitched it about right. Not one for widows and orphans though if that is what you mean!

I have quite a small position as I am not that enthusiastic.

ps, I would not be at all surprised if this quickly ended up trading at a discount. If it does, I might consider buying a few more.

hiriskpaul wrote:

BullDog wrote:Isn't 12% in too good to be true territory?

In the current market, with the risks involved, I would say they pitched it about right. Not one for widows and orphans though if that is what you mean!

I have quite a small position as I am not that enthusiastic.

ps, I would not be at all surprised if this quickly ended up trading at a discount. If it does, I might consider buying a few more.

Thanks, indeed. Widows and orphans is exactly what I had in mind. I don't know much about the offering company. Sub prime lending isn't going away but paying the interest on such loans isn't going to get any easier in the current economic circumstances. I will watch from the sidelines for now as I don't know enough about the riskiness here.

hiriskpaul wrote:

BullDog wrote:Isn't 12% in too good to be true territory?

In the current market, with the risks involved, I would say they pitched it about right. Not one for widows and orphans though if that is what you mean!

I have quite a small position as I am not that enthusiastic.

ps, I would not be at all surprised if this quickly ended up trading at a discount. If it does, I might consider buying a few more.

I assume they can charge more than 12% Interest on loans to their customers, so just another source of capital. Assume its treated differently on there books to normal debt

BullDog wrote:

hiriskpaul wrote:

BullDog wrote:Isn't 12% in too good to be true territory?

In the current market, with the risks involved, I would say they pitched it about right. Not one for widows and orphans though if that is what you mean!

I have quite a small position as I am not that enthusiastic.

ps, I would not be at all surprised if this quickly ended up trading at a discount. If it does, I might consider buying a few more.

Thanks, indeed. Widows and orphans is exactly what I had in mind. I don't know much about the offering company. Sub prime lending isn't going away but paying the interest on such loans isn't going to get any easier in the current economic circumstances. I will watch from the sidelines for now as I don't know enough about the riskiness here.

I don't think there is anything particularly unsound with the business model. It is how the business is run that matters, like with many other businesses.

BullDog wrote: I will watch from the sidelines for now as I don't know enough about the riskiness here.

The risk as with any fixed interest bond is that they default wholly or partly on either the interest, the repayment in 2027 or both.

MickR wrote:Do you have any idea when the new notes will be available for purchase?

I can buy them online this morning, in round thousands, through ii. Pretty much at par.
Didn't, as I have enough.

BullDog wrote:

hiriskpaul wrote:

BullDog wrote:Isn't 12% in too good to be true territory?

Not one for widows and orphans though if that is what you mean!
I have quite a small position as I am not that enthusiastic.

Sub prime lending isn't going away but paying the interest on such loans isn't going to get any easier in the current economic circumstances.

Risk of bad debts, risk of regulatory interference in countries of operation.

V8

Thanks for the comments. I understand the risks of sub prime lending in broad terms. I have no idea how to judge the likelihood of those risks crystallising into real events is what would stop me tucking a few of these away until 2027. Thanks again.

BullDog wrote:Thanks for the comments. I understand the risks of sub prime lending in broad terms. I have no idea how to judge the likelihood of those risks crystallising into real events is what would stop me tucking a few of these away until 2027. Thanks again.

I hold some of the shares in IPF and they've fallen in value, lost around 50% over my period of 7 or 8 years, they yield around 11% just now. I bought some of the IPF3 too.

kempiejon wrote:

BullDog wrote:Thanks for the comments. I understand the risks of sub prime lending in broad terms. I have no idea how to judge the likelihood of those risks crystallising into real events is what would stop me tucking a few of these away until 2027. Thanks again.

I hold some of the shares in IPF and they've fallen in value, lost around 50% over my period of 7 or 8 years, they yield around 11% just now. I bought some of the IPF3 too.

Thanks for that. Brings to mind the mantra that there's no free lunch. Hence my initial reaction that the starting yield at IPO is in the too good to be true region. Appreciate all the comments, it's certainly educational.

88V8 wrote:I can buy them online this morning, in round thousands, through ii. Pretty much at par.
Didn't, as I have enough.

V8

I can't see them on ii yet? It says first day of trading 13 December 2022

NT.

They are showing on HL and the green trade button at the bottom of the page is active

https://www.hl.co.uk/shares/shares-sear ... lc-12-2027

With regards to risk, as long as they don't default, you will get your pound back in 3 years time irrespective of the performance of the company and share price. Otherwise it's 11% yield on the shares with possible further erosion of capital.

I will hold a few, part of a balance of risk across my portfolio. I need to sell some other stuff but will buy asap as I can't see the price going down for a while as there won't be any sellers at the minute

Noticed HL had then down as denominations of 100, not 1000

Mick R

NearlyThere wrote:

88V8 wrote:I can buy them online this morning, in round thousands, through ii. Pretty much at par.
Didn't, as I have enough.

I can't see them on ii yet? It says first day of trading 13 December 2022

It's funny with ii, what one can buy online and not.
If you select Bonds then type in IPF3, there they are. I only stuck in a trial order for 10,000... the price was par then some zeroes and decimals.
Was using the Classic portfolio, not that that should matter.

My IPF2 have not converted yet.

MickR wrote:Noticed HL had then down as denominations of 100, not 1000

Ahhh so, I only tried in thousands.

V8

I screwed up on this with AJ Bell. I was happy to swap my 7.75% for the new 12% bonds but ticked the wrong box and the default was no action. I've still got the 7.75% in the portfolio but don't think it worth selling the old and buying the new ones now. What's your view?

morgleman wrote:I screwed up on this with AJ Bell. I was happy to swap my 7.75% for the new 12% bonds but ticked the wrong box and the default was no action. I've still got the 7.75% in the portfolio but don't think it worth selling the old and buying the new ones now. What's your view?

You'd lose a few points selling the 23s, and you don't get the 1.5 point conversion fee or whatever it was... so that wipes out a year of the extra coupon. Unless the 27s move up, you may as well wait a year until the 23s redeem.

But if you wanted to look at it the other way, you can buy the 27s at near par, and although you'd lose the equivalent of the year's extra coupon, you head off the possibility that the 27s could move up.

But then they might move down.

So, do you think the 27s will move up, or down?

I would wait a year and redeem the 23s.

V8

I got a quote this morning to buy IPF2 at 98.45p, which I calculate as c.9.45% GRY to 14 December 2023.

Putting the higher yielding /longer dated IPF3 to one side, doesn't this seem rather attractive return for something that matures in less than 12 months? I converted 2/3 of my IPF2 to IPF3 but am now thinking of buying more IPF2. IPF is not without risk but of the bonds IPF2 (obviously) matures first so at a GRY of 9.45% would appear to me to be a decent one year risk/reward punt.