Tender offers Bristol & West prefs and BOI pibs

[Tara]

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

The acceptance rate for the NWBD offer was only about 10% and so clearly most holders were not tempted by 175p at the time.

Most holders either did not want to sell or would only sell for nearer £2 or above. And some were only interested to sell for £3.

viewtopic.php?p=423181#p423181

Who knew that the UK and US would keep printing billions until inflation had completely run out of control?

The decision by the overwhelming majority of NWBD holders to reject the 175p offer was rational given all of the evidence that was available to them at the time.

[PeterGray]

Looking at BOE historical bank rates here: https://www.bankofengland.co.uk/boeapps ... k-Rate.asp is worth doing

The average, since 1975, is 6.2%. We've had several years of freakishly low rates and many people have started assuming they are the norm.

Current rates are below the longer term average over the last half century.

I don't disagree that they are likely to fall from here, at sometime, but I'd see another decade+ of very low rates as unlikely in the near future at least.

[GoSeigen]

Who knew [...]

Yup no-one could possibly have guessed.

The decision by the overwhelming majority of NWBD holders to reject the 175p offer

Agree very much you were part of the majority but personally I don't invest by democratic vote. I invest based on my reading of the economy.


GS

EDIT: For the purposes of this tender offer I'm just making a subtle point about greed v. fear and how bond pricing behaves...

[88V8]

Who knew [...]

Yup no-one could possibly have guessed.

The decision by the overwhelming majority of NWBD holders to reject the 175p offer

Agree very much you were part of the majority but personally I don't invest by democratic vote. I invest based on my reading of the economy.
EDIT: For the purposes of this tender offer I'm just making a subtle point about greed v. fear and how bond pricing behaves...

I tendered some NWBD and kept some.
Now I could buy more and probably will, at around 128p.
In the meantime the cash was spread into various other investments, some good some not but nothing's perfect.

No good looking back, the past is the past, the heady SPs of yore have been replaced by the heady yields of now.

I am still tendering my BOI and will recycle the premium into more FI, I think we are very near the bottom and it's a great time to buy.

V8

[Laughton]

From Evening Standard today (OK, not everyone's cup of tea):-

Two–year and five-year gilts are both at new 15-year highs again, as fears over interest rates continue to increase.

The two-year gilt is now yielding 5.41%,getting close to exceeding the highest levels reached in 2008. The five-year gilt is now yielding 4.83%. Longer yields continued to climb as well.

That comes as markets now expect interest rates to peak at 6.5%, with a serious chance of rates hitting 7%.

[Padders72]

From Evening Standard today (OK, not everyone's cup of tea):-

Two–year and five-year gilts are both at new 15-year highs again, as fears over interest rates continue to increase.

The two-year gilt is now yielding 5.41%,getting close to exceeding the highest levels reached in 2008. The five-year gilt is now yielding 4.83%. Longer yields continued to climb as well.

That comes as markets now expect interest rates to peak at 6.5%, with a serious chance of rates hitting 7%.

This is exactly what you have to bear in mind. Making decisions based on historic low interest rates is folly when there is a good chance of 6.5% or higher in the near future. At that point the usual FI suspects will likely be yielding more like 8-8.5% rather than today's mid 7s, so BOI for instance if still extant would be trading in the 150s, NWBD in the 100s. I am beginning to see the sense in taking the 194p since in 3 months it may buy an awful more yield than today. If the bank don't get the numbers to sweep everything up, buying back in after the inevitable large post tender price drop also looks more and more appealing.

[BondSquared]

Indeed BoI has been caught in a classic trap with a fixed rate tender with a long tender period - they are essentially short an option on interest rates rising & credit spreads widening, as we are seeing today. With every bp of rising rates/spreads, the tender is becoming more attractive. That's why many institutional tenders have a floating tender price referencing e.g. a benchmark gilt yield, or swap rate. But not so BoI ... fixed bond price tender, with a very very long tender period for retail, making that option so valuable to retail bondholders (as opposed to the professional instis, who did not have the luxury of such a long period/option value).
Tendering in full (unless, of course, we see a massive rally in gilts).

[Padders72]

ii have now a corporate action for this. This is the wording of the 4 options they provide, their deadline for responding is 26/7/23:


"Your options are:

OPTION 1: Do Nothing (Default). You will keep your current holding if you take no action.

OPTION 2: Tender any or all your bonds, and vote in favour of the offer. Elections must be submitted in multiples of 1,000 bonds. You will be issued with GBP1.92031 in exchange for each bond, comprising a GBP1.88 offer payment and GBP0.04031 in lieu of accrued interest. You will also receive a voting fee of GBP0.02 per bond, subject to the success of the resolution to approve the redemption. Please note that an extension to the acceptance deadline may result in a corresponding adjustment to the payment in lieu of the accrued interest.

OPTION 3: Vote in favour of the redemption. Votes must be submitted in multiples of 1,000 bonds. If the resolution is successful, you will receive a voting fee of GBP0.02 per bond.

OPTION 4: Vote against the redemption. Votes must be submitted in multiples of 1,000 bonds. If the resolution is successful, you will receive a voting fee of GBP0.02 per bond.

The official pay date is 25th August 2023. It is expected that the payment and payment in lieu of accrued interest will be made concurrently. "

[Laughton]

OPTION 1: Do Nothing (Default). You will keep your current holding if you take no action.

Assuming that this relates to the 13.375% bonds.

Now I'm confused (again). That's not necessarily right though is it? I thought that if you don't tender but BOI get over 75% YES votes then they sweep up ALL the bonds.

No?

[Padders72]

OPTION 1: Do Nothing (Default). You will keep your current holding if you take no action.

Assuming that this relates to the 13.375% bonds.

Now I'm confused (again). That's not necessarily right though is it? I thought that if you don't tender but BOI get over 75% YES votes then they sweep up ALL the bonds.

No?

Sorry yes, my quoted text refers specifically to BOI 13.375%. I think that is badly worded, there is another document with the Corporate Action that does discuss the permission to redeem them up if the vote is carried. What they presumably should have said is that you keep your holding unless a sufficient yes vote allows forced redemption in which case you won't. It is the least attractive option though of course as all the others allow for a 2p uplift if a sweep does occur regardless of how you vote.

[BondSquared]

OPTION 1: Do Nothing (Default). You will keep your current holding if you take no action.

Assuming that this relates to the 13.375% bonds.

Now I'm confused (again). That's not necessarily right though is it? I thought that if you don't tender but BOI get over 75% YES votes then they sweep up ALL the bonds.

No?

Yes, but the corporate action is only about what you can do, not what's potentially being done to you. You can do nothing / tender / vote for / vote against. Whether or not there are enough votes for the bond to be redeemed is not something you alone can action (unless, of course, you own a qualifying majority of bonds).

If you do nothing, you keep your current holding. That current holding may subsequently potentially be redeemed early as part of a whole issue redemption via the newly inserted issuer call.

[BondSquared]

Assuming that this relates to the 13.375% bonds.

Now I'm confused (again). That's not necessarily right though is it? I thought that if you don't tender but BOI get over 75% YES votes then they sweep up ALL the bonds.

No?

Sorry yes, my quoted text refers specifically to BOI 13.375%. I think that is badly worded, there is another document with the Corporate Action that does discuss the permission to redeem them up if the vote is carried. What they presumably should have said is that you keep your holding unless a sufficient yes vote allows forced redemption in which case you won't. It is the least attractive option though of course as all the others allow for a 2p uplift if a sweep does occur regardless of how you vote.

No action / not voting would have been a rational choice if you're strongly opposed to the potential early redemption but think that a qualifying majority of bondholders will vote in favour, yet you believe a that meeting the quorum is on the cusp - in which case you would not want to vote, as your vote, even your vote against, will help meet the quorum, and you want the quorum requirement to fail.

However, we now already know that the quorum has been met from the votes received from the institutional bondholders, so trying to play the "hope the quorum fails" game by not voting is no longer rational, so anyone should vote now (voting via tendering or voting only for/against).

[Kr1ck]

Can you tender some of your holding, or is it all or nothing? For ii and AJ Bell (so I assume all other brokers) you can tender part of your holding

Can you still vote yes or no, irrespective of whether you tender none, any or all of your shares? Yes

Confirm that if the majority of vote yes, then they will call all of the shares - Not the majority, 75% need to vote in favour (look like they'll get it from the results from institional holders).

I've decided to tender as this offer becomes more attractive as bond yields continue to rise. I can buy back into other FI instruments at better yields but may not buy back in immediately as interest rates look like they have a bit further to go and could pick up at yields near 8-8.5%. You also have the potential that other lenders may launch offers too as prices fall. Sad to see the death of FI instruments though.

[Kr1ck]

Sorry, I was replying to a post from the first page. My bad.

[Padders72]

Sorry, I was replying to a post from the first page. My bad.

I did wonder if there was an echo in here

[StillFalling]

Burford Capital now redeeming theirs 6.15% 2024 bonds early. So looks like others are going down the same route.

[FrankSeymour]

Both II and HL have posted response templates to the offer to purchase BOI 13 3/8 Bonds.
However neither of them have dealt with the issue of appointing Proxies or attending the meeting on the 4th.
Holders in paper form were given a swish paper response form by the Bank, which has the option of appointing a proxy and the option to attend the meeting.
I secure messaged both II and HL,
II will issue a letter so I can attend, no response to the two secure messages I have sent so far to Hargreaves.

[Laughton]

And still nothing from iweb.

Are there any other "major" brokers that you're still waiting to hear from?

[2boi2]

..
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%
Coventry PIBS 8.1%
Leeds PIBS 7.9%
Newcastle PIBS 7.7%
Nottingham PIBS 7.8%
Skipton PIBS 8.2%

I assume the tender will go through and my mind is turning to what to do with the cash so thanks for the list. I should add though that some of those are not easily tradable, eg HL for one no longer let you buy Leeds or Skipton. Relatedly the spreads will be big. Also some have maturity dates which are not far off.

I was wondering about a long dated bond ETF, e.g. iShares Over 15 Years Corporate Index Fund, Yield To Maturity 5.86%, average maturity 24 years. Or Lyxor iBoxx GBP Liquid Corporates Long Dated YTM 6.57%. Still not as good as BoI though.

[FrankSeymour]

The list is useful, how many of these are undated or perpetual?
The jury on the takeout only gives its verdict on the meeting of the 4th of next month.
I do not know what the result may be but it is possible that the retail investors may vote no in sufficient numbers.
I have voted NO.