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Lloyds Prefs Tender Offer

Gilts, bonds, and interest-bearing shares
JohnEdwards
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Re: Lloyds Prefs Tender Offer

#463590

Postby JohnEdwards » December 6th, 2021, 6:13 pm

GoSeigen wrote:
JohnEdwards wrote:
JohnEdwards wrote:
I suppose the biggest question mark would be whether there would be sufficient availability, once the tendered shares have disappeared from the market; however, it appears that many institutional holders have decided to remain and I expect most retail holders will do so too - but almost by definition, none of them will be short-term sellers, especially at a lower price!

I'd love to hear others' views on this possibility.

So guys - any thoughts on this?


Okay I'll bite on the paragraph quoted.

I think you need to carefully work through the logic of this again. In my experience many people (perhaps even the majority) are quite willing to sell at lower prices and reluctant to sell at higher prices -- this is "dumb money" behaviour (by definition).

If your strong logical conviction is that this tender price is some sort of high point for LLPC/D/E and that prices will be substantially lower at some point hereafter and in the meantime you have other good ways to invest your assets, then it makes perfect sense to be selling. If you are proved correct, (i.e. prices fall substantially) then what does that say about those who refused to sell? Well clearly many of them had taken the wrong side of that trade: they made a call, perhaps hoping for further rises and were wrong. What makes you think that these people are going to be wiser when the price has fallen? Their typical psychology is to laugh at small falls and convince themselves they are part of the ups and downs. When the fall becomes painful (and often they are over-exposed) they begin to doubt themselves. Then a final washout happens at prices where either they have to sell having delayed the decision too long, or lose hope of the price rising again, or fear some other catastrophe. So those people it turns out are very willing to sell at lower prices.

In my experience it's easy to buy shares when prices are significantly depressed. One needs to be able to do so confidently and patiently, which you cannot do if you hold too many of them already.

Obviously in the above discussion the crucial question is whether your own call is correct. Make sure you're confident of your logic, then make the decision. I did with NWBD; in fact I sold in the market before the tender close date and had the wonderful opportunity to buy another share very cheap just as good news hit the company. So was that blind luck? Or was it a natural result of prudent asset allocation??

Good luck with your choice.

GS

Thank you for such a thought-provoking response GS.

The psychology of the market (or rather, the sum of its participants) is an endlessly fascinating subject and alternative views on such matters (and many others) create the opportunity for buyers and sellers to meet at a price.

I do (painfully!) recognise your description of sellers' behaviour in a falling market and you are quite correct about buying low being far easier than selling high. I think your discipline in investment matters is far more rigorous than mine. My thought-problem is that I DON'T have an opportunity waiting for investment - in fact, out of an abundance of caution, I have too much cash in my SIPP (and have for years!). I am definitely over-exposed to bank prefs etc because I place great weight on the 'guaranteed' income; I just don't see them as a vehicle for achieving capital gains and if the price falls back I won't be too concerned - as long as the income remains certain! And it's hard to see where such income would otherwise be sought.

So the plan I postulated was aimed at meeting my objective, while (perhaps greedily?) seeking a shortish-term advantage offered by the tender. Perhaps the answer is to tender and then be VERY patient until something (inflation/interest rates/scare stories from Lloyds) causes the price to fall significantly and to shake out the doubters you describe so well. If it doesn't happen, I will have been sitting on far more cash than now, having sacrificed the present 6% yield for who knows how long! Although I will have realised large (tax-free) capital gains as compensation, I would be very disappointed if the opportunity to re-purchase never arose.

I think that I am by nature a long-term holder (of most investments) and not a trader; perhaps that means I should forget my plan!

Sorry if this has become rather philosophical!

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Re: Lloyds Prefs Tender Offer

#464172

Postby 88V8 » December 8th, 2021, 10:37 am

JohnEdwards wrote:Perhaps the answer is to tender and then be VERY patient until something (inflation/interest rates/scare stories from Lloyds) causes the price to fall significantly and to shake out the doubters you describe so well. If it doesn't happen, I will have been sitting on far more cash than now, having sacrificed the present 6% yield for who knows how long! Although I will have realised large (tax-free) capital gains as compensation, I would be very disappointed if the opportunity to re-purchase never arose.

I sold most of my Banks prefs.
When they no longer count as capital, the banks will wish to be rid of them, and will be rid of them by fair means or foul.
So I would no longer regard them as a long-term source of income, and I decided to get out while the going was good. Regardless of price I will not be buying back in.

The only Prefs I'm holding now are NWBD (and NATW which is not a Pref) plus ELLA, AV.A/B and BWRA all which I regard as safe from skullduggery, albeit they could be retired at market price.

I agree that it's hard to find bomb-proof income nowadays, and I am turning more towards ITs, which is a bit of a copout.

V8

JohnEdwards
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Re: Lloyds Prefs Tender Offer

#464235

Postby JohnEdwards » December 8th, 2021, 1:24 pm

Thanks all - especially for the alternative suggestions for income.

I've given your eloquent thoughts plenty of consideration - but despite their thrust, I've decided to stay put. Let's hope I don't regret it in due course......

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Re: Lloyds Prefs Tender Offer

#464245

Postby AleisterCrowley » December 8th, 2021, 1:58 pm

I took the coward's way out and got rid of 'some ' of them (c60%) so I'll neither be exactly right, or exactly wrong

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Re: Lloyds Prefs Tender Offer

#464723

Postby Breelander » December 10th, 2021, 12:23 pm

LLOYDS BANKING GROUP PLC ANNOUNCES TENDER ACCEPTANCE AMOUNTS AND RESULTS FOLLOWING THE FINAL EXPIRATION OF THE TENDER OFFERS IN RELATION TO ITS THREE SERIES OF STERLING PREFERENCE SHARES

...The Offeror hereby announces that it accepts for purchase all Preference Shares validly tendered pursuant to the Offers prior to the LBGSA Tender Deadline and the Retail-Only Expiration Deadline, as the case may be, as set out in the table below

https://www.investegate.co.uk/lloyds-ba ... 28022947V/

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Re: Lloyds Prefs Tender Offer

#464921

Postby Holts » December 11th, 2021, 8:42 am

Quite surprised at the low take up overall.

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Re: Lloyds Prefs Tender Offer

#464960

Postby hiriskpaul » December 11th, 2021, 11:23 am

FWIW I tendered all of ours. That means a CGT hit and corporation tax on those we held in Ltd company, but decided the exit price was OK. Tax advantages of the Ltd Co have been curtailed as well, with corporation tax scheduled to rise. For the first time in over a decade that means we will hold no Lloyds securities.

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Re: Lloyds Prefs Tender Offer

#465015

Postby JohnEdwards » December 11th, 2021, 2:29 pm

I'm not surprised at the low acceptance rate, but what happened to about half (£45m) of the £100m LLPD not represented by those tendered and those remaining? Has there been a previous repurchase?
I wonder if the remaining £43m is sufficient for a sufficiently liquid market to avoid horrible spreads????
So, buckle the seat-belts for the marathon!

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Re: Lloyds Prefs Tender Offer

#465024

Postby Breelander » December 11th, 2021, 3:19 pm

JohnEdwards wrote:I'm not surprised at the low acceptance rate, but what happened to about half (£45m) of the £100m LLPD not represented by those tendered and those remaining? Has there been a previous repurchase?

Not a repurchase, it was an exchange offer in 2009.

On 3 November 2009, Lloyds Banking Group plc ("Lloyds Banking Group") announced its Non-US Exchange Offer, pursuant to which it invited Holders of certain Existing Securities to Offer to Exchange their Existing Securities for an aggregate of £7.0 billion of Enhanced Capital Notes or an aggregate Exchange Consideration Amount equivalent to £1.5 billion. Lloyds Banking Group hereby announces the results of the Non-US Exchange Offer, the level of Offers to Exchange received by the Exchange Agents pursuant to the US Exchange Offer as at the Early Tender Deadline and an increase to the Maximum ECN New Issue Amount under the US Exchange Offer.

https://www.investegate.co.uk/lloyds-ba ... 00028997C/

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Re: Lloyds Prefs Tender Offer

#465025

Postby XFool » December 11th, 2021, 3:31 pm

...Won't be doing that again, then? :|

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Re: Lloyds Prefs Tender Offer

#465432

Postby Zebedee71 » December 13th, 2021, 10:41 am

"..Won't be doing that again, then? :|

give or take a bit Lloyds took £70mm nominal out of play, leaving £340 outstanding (which included a chunk of debt of unknown size held by US holders and not part of the offer) - I guess the outcome is not viewed as a great success by most - I take the view that Lloyds will not be too unhappy

1) in pure cashflow, invested £70mm + costs in return for reduced annual interest charge circa $6mm (before tax effects if any) where their cost of capital is peanuts vs the interest rates being paid
2) Having now done it, holders/punters will be more wary of their next steps, if any
3) They can game plan their next steps with a widened set of options

FWIW I got rid of 50% of LLPC/D and retained 100% of E and if the great reset starts in a few months I will look to buy back the 50% in value, ideally in LLPE form - more a hope than expectation and assumes that there is no hint of more pending Lloyds skulduggery - I have long and angry memories of the ECN debacle

Z71

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Re: Lloyds Prefs Tender Offer

#465464

Postby XFool » December 13th, 2021, 12:00 pm

...Why did you retain all of your LLPE?

Presumably because you expect them to be called in 2024?

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Re: Lloyds Prefs Tender Offer

#465508

Postby yieldhog » December 13th, 2021, 1:36 pm

As I posted earlier in this thread, I would be accepting the tender offer for the 9.25% prefs. and considering investment of some or all the proceeds into IUKD. In anticipation of the payment of the LLPC proceeds, I bought some IUKD for a yield of 5.85%, compared with an exit yield on the LLPC of 5.53%. At today's price, the prospective yield on the IUKD is around 5.69% (assuming around the same dividends as the past year, but hoping for a small increase). The IUKD goes xd on wednesday, so as well as the LLPC interest I will get a small dividend from the IUKD on December 31st. Still considering what to do with the rest of the the LLPC and POB (which was redeemed a few days ago) proceeds. All in my SIPP so no tax issues. Happy with the results so far.

Y

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Re: Lloyds Prefs Tender Offer

#465597

Postby Zebedee71 » December 13th, 2021, 9:58 pm

“..Why did you retain all of your LLPE?”

3 primary reasons
1) i needed somewhere to park cash over a 2 -5 year time horizon and managed to buy into LLPE at par to 1.06 when it crashed in the spring of 2020
2) if the recent tender was phase one of a multiple play by Lloyds to get rid of LLPC/D/E in due course, i think the logical backstop for “E” is the par call opportunity in a few years that is open to them. I take the view that my downside risk of “E” for me is therefore (hopefully) quite limited with the hope of continuing to collect the interest
3) on the other hand, what they could try to do to “C and D” given their alleged perpetual characteristics is likely to be from a far broader playbook - the interest rate and size of these items is a bigger ticket for Lloyds and I do not share the view that they care much about reputation etc if given an opportunity in the future . My downside price Risks with C and D are much larger having acquired them many years ago - a forced par call for example would be a painful virtual loss

So, looking holistically at the recent Lloyds offering, I was happy with keeping E but decided to derisk on C and D and reinvest some of that in the small remaining pool of “safer” bank issuances e.g ELLA, AV etc. I know they offer less yield but I am long past trying to scrape small extra yields in these crazy debt and equity markets where risk does not seem to be properly priced IMO ….but I have thought that for the last 6 years and holding cash waiting for the crash has been, thus far, a failed strategy, e.g parking money for example in premium bonds vs circa 6% in “E”

Hope that answers
z71

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Re: Lloyds Prefs Tender Offer

#465607

Postby XFool » December 13th, 2021, 10:38 pm

...Yes thanks. Very clear.

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Re: Lloyds Prefs Tender Offer

#466156

Postby StayinAlive » December 15th, 2021, 7:34 pm

Just received the proceeds. My understanding is that if I tendered AFTER the General Expiration Deadline (19th Nov) but BEFORE the Retail-only Expiration Deadline (9th December), I should also receive the Incremental Accrued Dividend Payment (which I haven't).
Did I misunderstand it?

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Re: Lloyds Prefs Tender Offer

#466162

Postby XFool » December 15th, 2021, 8:01 pm

StayinAlive wrote:Just received the proceeds. My understanding is that if I tendered AFTER the General Expiration Deadline (19th Nov) but BEFORE the Retail-only Expiration Deadline (9th December), I should also receive the Incremental Accrued Dividend Payment (which I haven't).
Did I misunderstand it?

I thought this was coming later. But will have to check.

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Re: Lloyds Prefs Tender Offer

#466163

Postby XFool » December 15th, 2021, 8:18 pm

Yes.

"All payments of the Incremental Accrued Dividend Payment will be made outside of the CREST system and are therefore expected to be issued 6 business days after the Retail-Only Settlement Date."

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Re: Lloyds Prefs Tender Offer

#466168

Postby StayinAlive » December 15th, 2021, 8:36 pm

Much obliged XFool. I missed that bit!

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Re: Lloyds Prefs Tender Offer

#466319

Postby digitaria » December 16th, 2021, 11:52 am

I have tendered my LLPC prefs. Proceeds were received today in ii and iWeb accounts.

Now to find an alternative home for this cash...


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