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MBSR/MBSP: Where do you hold them?

Gilts, bonds, and interest-bearing shares
GoSeigen
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Re: MBSR/MBSP: Where do you hold them?

#498633

Postby GoSeigen » May 5th, 2022, 12:51 pm

hiriskpaul wrote:MBSR payment is late at HL. Has anyone been paid yet?


I just emailed to chase them up today, have received interest at both EQI and II so it's a HL problem I think.

GS

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Re: MBSR/MBSP: Where do you hold them?

#498672

Postby tincture » May 5th, 2022, 3:03 pm

Received at iDealing dated 29/4/22

GoSeigen
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Re: MBSR/MBSP: Where do you hold them?

#498839

Postby GoSeigen » May 6th, 2022, 10:30 am

GoSeigen wrote:
hiriskpaul wrote:MBSR payment is late at HL. Has anyone been paid yet?


I just emailed to chase them up today, have received interest at both EQI and II so it's a HL problem I think.

GS


Credited this morning at Hargreaves Lansdown.

GS

GoSeigen
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Re: MBSR/MBSP: Where do you hold them?

#503061

Postby GoSeigen » May 26th, 2022, 8:03 pm

hiriskpaul wrote:
GoSeigen wrote:MBSR prices are firming up after their Ukraine war dip, they are going ex soon so buyers will get 4% of their purchase price back in a few weeks. At close to 8% yield these should provide sufficient protection against the current inflation.

WBS are also about to pay their first interest in years, albeit only 0.5%, to long-suffering holders. Their price has risen and I think at c80p they are around fair value at the moment.


GS

FWIW, I cannot get an online buy quote for the 8%, not even 1k nominal. Less of a problem selling, quoted 100.25 for 10k nominal, 100.05 for 50k.

Still no announcement on the future plans for the society. Any thoughts on this? Return to normal lending now a possibility I would have thought, but merger with another BS more likely, or perhaps a takeover by whoever holds the PPDS?

Edit: AGM on 27 April, maybe we will get an announcement or some guidance then.


Best set of results for West Brom in the twelve years I've been tracking them on my spreadsheet. Around 24m post-tax profit for the year removes entirely the old PPDS reserve deficit which means interest can now be paid on the PIBS (WBS.L). Indeed a small payment of 0.5% was made a month ago, but I expect the next one to be close to the maximum payable. AFAICS West Brom have not announced the reset interest rate as they were supposed to around March 2021 but by my estimation it should be approx. 3.5p per 100p nominal. The interest rate resets every five years (next time Apr 2026) so the PIBS behave like a 5-year quasi inflation-linked bond. Long-term I'd guess their price should trade in a loose range, maybe 100+/-15p, barring a disaster of some sort; an active investor might look to be adding near the bottom of that range and offloading near the top.

Worrying item to watch: the rapid growth of admin expenses.

GS
Disclosure: I have been reducing my overweight holdings of the PIBS, will retain a modest exposure unless the price looks silly.

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Re: MBSR/MBSP: Where do you hold them?

#508641

Postby tincture » June 21st, 2022, 12:10 pm

AFAICS West Brom have not announced the reset interest rate as they were supposed to around March 2021 but by my estimation it should be approx. 3.5p per 100p nominal. The interest rate resets every five years (next time Apr 2026) so the PIBS behave like a 5-year quasi inflation-linked bond.


GS,

Thanks for your continued posts on these.

Can I just confirm that it is the PIBS (i.e. WBS) you are talking about which reset in 2021 and again in 2026 (i.e. not the CCDSs), and resets to what?
And your expected 3.5p per 100 is that this year - annualised or semi ?

Seems to bear little relation to the headline 6.15% I thought I was in for - although admittedly when I bought them they were distressed and I wasn't buying for the coupon.

I was minded to sell them on the basis the yield was now similar to LLPC , but may have to re-evaluate if thats not the case - although this complexity makes them difficult to value for me, and perhaps I should sell anyway.

I will hold MBSR for the foreseeable unless or until the average pref yields looks like it will catch up with them.

Sold the rest of my prefs when I tendered LLPC/D. Half the proceeds went into various stock trackers which are down ~10% since (but at least not as much as the prefs!), the other half is cash still waiting inspiration.

tincture

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Re: MBSR/MBSP: Where do you hold them?

#508868

Postby GoSeigen » June 22nd, 2022, 4:00 pm

tincture wrote:
AFAICS West Brom have not announced the reset interest rate as they were supposed to around March 2021 but by my estimation it should be approx. 3.5p per 100p nominal. The interest rate resets every five years (next time Apr 2026) so the PIBS behave like a 5-year quasi inflation-linked bond.


GS,

Thanks for your continued posts on these.

Can I just confirm that it is the PIBS (i.e. WBS) you are talking about which reset in 2021 and again in 2026 (i.e. not the CCDSs), and resets to what?
And your expected 3.5p per 100 is that this year - annualised or semi ?

Yes, WBS have a coupon reset every 5 years from 2021, to a 2.8% margin above 5-yr gilt yield at reset date, so the 6.15% coupon is now history, unless something weird happened that I haven't noticed.

Seems to bear little relation to the headline 6.15% I thought I was in for - although admittedly when I bought them they were distressed and I wasn't buying for the coupon.

I was minded to sell them on the basis the yield was now similar to LLPC , but may have to re-evaluate if thats not the case - although this complexity makes them difficult to value for me, and perhaps I should sell anyway.

It's very tricky to calculate because there's always the possibility of a call, which can happen on any interest payment date. Discounting very strange gilt movements this means the price is unlikely to rise far above 100p. When priced below par the call is not much of an issue. If they are priced at a 2.8% yield premium to 5-year gilts then each reset date they will trade at par, right? Below par would imply greater premium than 2.8% and above par a smaller premium. So I figure at about 87p to sell there is still a sizeable premium priced in, probably justified by where inflation is at the moment, but if inflation drops back then there is scope for the price to move much closer to par.

Alternatively markets might move gilts pricing back to the 3% level over the medium term. Then in 2025 we can expect a coupon reset to 5.8%; assuming the prices is around par then we currently have a four year bond with annual 3.5% coupon (guess) for future payments giving a Yield to Reset of 7.5%. Not stellar but acceptable in the circumstances?

I'll deal with above-par cases when they happen, LOL...

I will hold MBSR for the foreseeable unless or until the average pref yields looks like it will catch up with them.

Sold the rest of my prefs when I tendered LLPC/D. Half the proceeds went into various stock trackers which are down ~10% since (but at least not as much as the prefs!), the other half is cash still waiting inspiration.

tincture


Hopefully my musing about pricing helps a little. What do others think?

GS

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Re: MBSR/MBSP: Where do you hold them?

#509218

Postby Gan020 » June 24th, 2022, 11:36 am

GoSeigen wrote:Hopefully my musing about pricing helps a little. What do others think?
GS


In my view 1SBB offers better value as they are both around 95p to buy. OSB is better credit quality and has never failed to pay the coupon.

Currently paying 4.6%.

Resets in 2024 and should reset to 5 year gilts +4.28% with the SONIA adjustment.

Note imho that it's highly likely 1SBB will be called at the reset date in 2024. 1SBA has already been called. Although they are slightly different instruments. Tbh I would prefer it isn't called.

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Re: MBSR/MBSP: Where do you hold them?

#519435

Postby GoSeigen » August 3rd, 2022, 11:51 am

MBSR up about 7% since I last looked, which is nice. Also, they seem to be tradeable on II now, has anyone else noticed that?

GS

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Re: MBSR/MBSP: Where do you hold them?

#520745

Postby Wozzitworthit » August 8th, 2022, 2:48 pm


Possible merger of Manchester and Newcastle Buiding Societies


https://www.londonstockexchange.com/new ... t/15575891

and a mirror statement

https://www.londonstockexchange.com/new ... t/15575890


Woz

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Re: MBSR/MBSP: Where do you hold them?

#520749

Postby Padders72 » August 8th, 2022, 2:57 pm

Interesting. What is a likely outcome for our instruments then do we thing? Tender perhaps? Under what circumstances can they force repurchase, perhaps if tying it up with the merger vote. MBSR are sitting around 105p mid so a par tender or purchase wouldn't be the end of the world I guess but not ideal, better for those with the lower value MBSP, unless different prices were used that is.

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Re: MBSR/MBSP: Where do you hold them?

#520769

Postby hiriskpaul » August 8th, 2022, 4:34 pm

Excellent news! I would expect the PIBS to survive the merger with just a name change.

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Re: MBSR/MBSP: Where do you hold them?

#520781

Postby JohnEdwards » August 8th, 2022, 5:14 pm

.. and a more certain future?

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Re: MBSR/MBSP: Where do you hold them?

#520787

Postby Padders72 » August 8th, 2022, 5:39 pm

hiriskpaul wrote:Excellent news! I would expect the PIBS to survive the merger with just a name change.


Why? What’s the advantage to the new organisation in taking on liabilities like theses? A merger/take over vote strikes me as a good opportunity for them to mop them up if they so choose.

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Re: MBSR/MBSP: Where do you hold them?

#520803

Postby GoSeigen » August 8th, 2022, 6:57 pm

hiriskpaul is right, the PIBS won't be touched. Prices should firm as a more robust issuer will make them less risky.

GS

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Re: MBSR/MBSP: Where do you hold them?

#520813

Postby Padders72 » August 8th, 2022, 7:26 pm

Well if that is the case, and the majority seem persuaded it is, then Happy Days indeed. Time to add a few back in maybe.

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Re: MBSR/MBSP: Where do you hold them?

#521966

Postby GoSeigen » August 12th, 2022, 5:57 pm

No comments here on the half year results yet...

The report refers positively to the Exclusivity Agreement stating that the board believes a merger would be in the best interests of the members. I can't see that it would be anything but positive for Newcastle either, given that MBS equity is about 20% of assets with healthy regulatory capital ratios. It seems to me that profitability of the MBS part could be improved by reduction of overheads in a merger.

I can't see any special opportunities in this situation (PPDS maybe, but they are unlisted and I have no idea of their price or availability) but if it weren't for the current inflation figures I think MBSR would be justifiably trading above 120p as they have in the past. It's worth recalling that MBSR are senior to MBSP, though not sure it makes much difference in the mooted merger.

Have a good weekend all.

GS

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Re: MBSR/MBSP: Where do you hold them?

#523728

Postby GoSeigen » August 19th, 2022, 1:35 pm

GoSeigen wrote:MBSR up about 7% since I last looked, which is nice. Also, they seem to be tradeable on II now, has anyone else noticed that?

GS


Hmm suddenly they're not tradeable online at II again. I don't know what's going on there. Rather irritating that they can't decide...


GS

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Re: MBSR/MBSP: Where do you hold them?

#585375

Postby GoSeigen » April 26th, 2023, 4:26 pm

Wow, MBSR are actually in mild backwardation today: you can buy them cheaper than you can sell them!! Last time I saw this was in the wake of the 2008 GFC.

Not sure about liquidity but I got a firm quote to buy a few thousand at 110p with sell price in larger shapes 110.35p.

You can also get a small yield uplift by selling MBSR and buying MBSP (offered at 94.5p).

Roll up roll up!

GS

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Re: MBSR/MBSP: Where do you hold them?

#613165

Postby GoSeigen » September 5th, 2023, 10:32 am

Nice to see these ticking up a bit, MBSR spread not great at 105.2-109 but should be a reasonable buy at the price and slightly cheaper than when I last posted, at 7.3% running yield, there's a slight uplift in yield vs the recently tendered BOI bonds.

These PIBS are now on Newcastle Building Society's balance sheet, so should be rather more secure than before given the relative size of Newcastle vs Manchester.


GS
Disclosure: I hold a large tranche of MBSR.


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