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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?

#420526

Postby GoSeigen » June 18th, 2021, 3:51 pm

Manchester Building Society response to the judgment:

https://www.londonstockexchange.com/new ... t/15023898

I think it highly likely that PIBS coupon payments will resume forthwith and the Society's future must be assured now. I'm amazed these are still trading around 50p. A bargain if you can get them.

GS

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

#420685

Postby carnie » June 19th, 2021, 9:09 am

Great news! I didn't expect it to go their way but very pleased it did.

I'm not sure what value of costs/interest will be awarded on top. Does anyone have an idea?

There is also a deferred tax asset of around £4m that was written off through the PnL several years ago. Assuming a return to business as usual I assume this will be credited back through the P&L. It must be more valuable now that corporate tax rates are rising.

Well done to all who hold. I hope to see these rise to 60p plus next week to reflect the improving prospects.

C

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

#420695

Postby Padders72 » June 19th, 2021, 10:12 am

I've not studied the ruling in detail, but is the £14m headline figure not small beer in terms of the PIBS liabilities? Just musing since there is still a chance of course that they might find a reason to continue dodging paying, an announcement of that kind would presumably send the price crashing.

Sorry for the negativity, I'm pondering exactly how deep to dive in now there seems to be light at the end of the tunnel. If that isn't a mixed metaphor too far!

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

#420704

Postby yieldhog » June 19th, 2021, 10:51 am

I own some of the 6.75% MBSP Pibs.
Looking ahead to the possible resumption of interest payments I looked at the Nationwide 6.25% POBA for a rough idea of where the price of MBSP might end up, other things being equal. According to the Hargreaves Lansdown page, POBA trades on a mid-market current yield of 5.82%. For MBSP, a price of 115 would produce a current yield of 5.87%. My gut feeling is that initially the price of MBSP would trade nearer par if and when interest payments resume but once it settles down it might get closer to the 115 level.
I'm currently moving out of single company exposure and I expect inflation to increase significantly, so long-dated bonds are on my sell list. Hence I would look to sell if MBSP got to around 110.
Any other thoughts on where MBS yields will go now?

Padders72
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Re: MBSR/MBSP: Where do you hold them?

#420714

Postby Padders72 » June 19th, 2021, 11:55 am

yieldhog wrote:I own some of the 6.75% MBSP Pibs.
Looking ahead to the possible resumption of interest payments I looked at the Nationwide 6.25% POBA for a rough idea of where the price of MBSP might end up, other things being equal. According to the Hargreaves Lansdown page, POBA trades on a mid-market current yield of 5.82%. For MBSP, a price of 115 would produce a current yield of 5.87%. My gut feeling is that initially the price of MBSP would trade nearer par if and when interest payments resume but once it settles down it might get closer to the 115 level.
I'm currently moving out of single company exposure and I expect inflation to increase significantly, so long-dated bonds are on my sell list. Hence I would look to sell if MBSP got to around 110.
Any other thoughts on where MBS yields will go now?


Probably nearer BOI than NWBD so circa 6.% would be my guess but of course an increase in inflation would put upwards pressure on yields.

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

#420730

Postby Setanta » June 19th, 2021, 1:09 pm

I have held these for a few years although I had sold most into the recent rise. Surprisingly I was able to buy back immediately after the judgement was announced, although later on Friday I couldn't find any more to buy.

I see three scenarios here:
1. They are taken over by another BS (Nationwide is supposed to own the PPDSs)
2. They try to rebuild themselves as the MBS
3. They continue to run down/liquidate themselves at some point.

My guess would be the first option, and I expect there would be a tender offer prior to this being announced as Nationwide would not want these as subordinated bonds in their capital structure.

In terms of the significance of the award, the Pillar 3 disclosure for 2020 shows RWAs of £124 million and loans and advances of £181 million (and falling).

So this judgment adds more than 10% to CET1 capital (which was £6.66 million in the disclosure). Without new hits, total CET1 should be greater than 16%. As long as interest rates remain lowish, the lifetime mortgages are profitable, although this profit may continue disappearing into new impairments. Expenses will be much reduced as these have been inflated by court case costs and consultancy related to PRA requirements.

It is hard to see a scenario in which these return less than par plus ongoing interest, so I think the low closing price on Friday just reflects the illiquidity out there.

Setanta

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

#420739

Postby hiriskpaul » June 19th, 2021, 1:55 pm

Just seen this. Fantastic result and a unanimous verdict, which I really was not expecting and had really prepared myself for another failure. The judgement is not as good as it could have been as I note there is ".. a reduction in damages of 50% for contributory negligence". Even so the award will easily clear the £3.7m PPDS deficit and the society should be profitable in future, so I cannot see why PIBS payments should not be restarted.

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

#420864

Postby GoSeigen » June 20th, 2021, 10:39 am

Setanta wrote:It is hard to see a scenario in which these return less than par plus ongoing interest, so I think the low closing price on Friday just reflects the illiquidity out there.

Setanta


Setanta, great to see you post here.

I agree, I expect the price of these to rise above par in pretty short order. I will be happy with an 8% yield but guess they could go as high as 6.5% or better given where other similar securities are. Even the Wasps bond is trading near par which seems absurd to me!


GS

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

#421079

Postby Rooky102 » June 21st, 2021, 8:42 am

Surely the big bad issue remains the Spanish lifetime portfolio?

A scan of the 2020 accounts gives 29 hits on "Spanish".
The average LTV is 111% (Surely a loan can't be on the books at over 100% when there is no recourse . And can roll up interest be booked past 100%?)

69% have LTV over 100% - so what happens when these people go into care or die? There is nothing in it for the beneficiaries to get a good, or any, price for the property. How does the Manchester even find out?

Manchester BS are going to need to put a squad in place to chase around Spain taking possession of the property, tarting it up and getting it sold to get anything near book value.

The accounts show that there are 34 with 'repayment due' which makes me think that they are not getting on too well with disposals (it was 33 last year - does that imply that most of those 33 are empty, unsold, and probably deteriorating?) or are the 34 all new?

Too pessimistic?

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

#421080

Postby carnie » June 21st, 2021, 8:45 am

Struggling to buy more this morning. On the phone to ii the price for MBSP has moved from 49p, 60p, 62p, 77p whilst they try to put the trade through..

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

#421086

Postby carnie » June 21st, 2021, 9:08 am

The Spanish life-time portfolio is definitely a pain. Roughly £50m gross lending with an £11m provision. Last year it was difficult to move around let alone sell houses. In the accounts they do talk about that being exceptional and they are expecting prepayment rates to swing back to something like normality. There will be some junk in that portfolio for sure but the revenue recognised is immediately provisioned if the LTV's are too high. With a net exposure of c£39m the news on friday will mean they can take further write downs without there being much/if any risk to the PIBS capital.

IMHO.

C

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

#421089

Postby hiriskpaul » June 21st, 2021, 9:14 am

carnie wrote:Struggling to buy more this morning. On the phone to ii the price for MBSP has moved from 49p, 60p, 62p, 77p whilst they try to put the trade through..

Just tried an online trade for 100k nominal of the 8% PIBS and was offered £90k! Did not proceed.

Stock impossible to buy at present, not even £1k.

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

#421105

Postby Padders72 » June 21st, 2021, 10:16 am

hiriskpaul wrote:
carnie wrote:Struggling to buy more this morning. On the phone to ii the price for MBSP has moved from 49p, 60p, 62p, 77p whilst they try to put the trade through..

Just tried an online trade for 100k nominal of the 8% PIBS and was offered £90k! Did not proceed.

Stock impossible to buy at present, not even £1k.


Makes sense. I asked for a price to buy 10K at 8.20am today and was told £1 min on MBSR. I think things might have gotten a little ahead of themselves. I can see some holders selling at this level since the restart of the interest isn't yet a sure thing and any tender might be at par.

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

#421548

Postby hiriskpaul » June 23rd, 2021, 10:48 am

Padders72 wrote:
hiriskpaul wrote:
carnie wrote:Struggling to buy more this morning. On the phone to ii the price for MBSP has moved from 49p, 60p, 62p, 77p whilst they try to put the trade through..

Just tried an online trade for 100k nominal of the 8% PIBS and was offered £90k! Did not proceed.

Stock impossible to buy at present, not even £1k.


Makes sense. I asked for a price to buy 10K at 8.20am today and was told £1 min on MBSR. I think things might have gotten a little ahead of themselves. I can see some holders selling at this level since the restart of the interest isn't yet a sure thing and any tender might be at par.

Prices down 10% since Monday. I am now being offered 81.1 for up to 100k nominal. As before, unable to get online quotes to buy any. Has anyone on here managed to buy either of the PIBS since the RNS?

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

#421657

Postby JohnEdwards » June 23rd, 2021, 4:52 pm

Prices down 10% since Monday. I am now being offered 81.1 for up to 100k nominal. As before, unable to get online quotes to buy any. Has anyone on here managed to buy either of the PIBS since the RNS?

Yes. I was able to buy £5k of each on Monday morning online through HL - unfortunately not at the brief opening price! I had placed a fill or kill order, but was too mean on the price limit. They didn't offer an ongoing limit order though.

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

#421956

Postby GoSeigen » June 24th, 2021, 3:28 pm

JohnEdwards wrote:
Prices down 10% since Monday. I am now being offered 81.1 for up to 100k nominal. As before, unable to get online quotes to buy any. Has anyone on here managed to buy either of the PIBS since the RNS?

Yes. I was able to buy £5k of each on Monday morning online through HL - unfortunately not at the brief opening price! I had placed a fill or kill order, but was too mean on the price limit. They didn't offer an ongoing limit order though.


Trade reporting suggests a large number of shares have been changing hands so one would think there would be better liquidity by now and indeed, MBSR and MBSP were available today in small quantities, about 5000 or so for online trading.

Managed to buy 10,000 MBSR in separate tranches but there seems to be no more supply now.

GS

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

#422150

Postby everhopeful » June 25th, 2021, 9:18 am

Managed to buy 9000 MBSP with HL this morning at 0.76 online.

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

#422171

Postby yieldhog » June 25th, 2021, 10:08 am

Price of MBSP seems to have settled down around mid-70s.

I'm not sure we will see much further change in price until there's an announcement about resumption of interest payments.
I believe that MBS is restricted in making any announcement about whether or not interest payments will resume until " no more than 30-days of the next interest payment due date ". The next interest payment due date is in October, so we may not get an answer to this until sometime in September.

A price in the mid-70s seems fair value until we get a definitive answer. A lot can happen between now and September and given that we can't be sure whether or not interest payments will resume I wouldn't be surprised to see the price slip a bit as holders get tired of waiting and decide to take profits (if they have any).

I hold some of the the MBSPs averaged in arond low 20s.

Y

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

#424697

Postby Setanta » July 4th, 2021, 3:31 pm

I’ve looked for info on the costs part of the gain MBS can expect. The clearest statement I found was in the 2019 half year results where it says:

As noted in the Strategic Report on page 3 of the 2018 Annual Report and Accounts, the High Court judgment resulting from the Society’s legal claim against its former external auditors, Grant Thornton UK LLP (“GT”), resulted in GT being awarded £2,309k interim costs. In addition, in 2019, the Society has paid a further £266k to GT in relation to legal fees associated with the unsuccessful appeal.

Working back thorough the accounts the MBS expenses have been much greater than this, but not all will be allowable. So if we assume that MBS will get the same amount of costs allowed as Grant Thornton, then the gain on reversing of costs in the original case and appeal will be circa £5.2 million, and adding a little for the Supreme Court appeal costs and interest should see a gain of around £5.4 million.

So assuming the circa £13.4 million damages figure, we can hope for £18.8 million in total.

Setanta.

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

#424931

Postby 88V8 » July 5th, 2021, 11:53 am

Apparent price disconnect between the 6s and 8s this morning.
6s at 82, 8s at 90.
Not tested the 6s, screen price, and perhaps just smoke based on buggerall volumes, but just bought 50k of the 8s at 94p, no accrued.

Guess if the 8s start paying they will go to 130/135 and the 6.75 will go to 110?
Fingers crossed.

V8


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