Lloyds Prefs Tender Offer

[digitaria]

This relates to LLPC/D/E instruments.

There is additionally "an update on the future regulatory classification" of these.

Details here https://www.investegate.co.uk/lloyds-ba ... 53459933R/

[88V8]

Well that's come sooner than I expected. I thought it was 2024 when banking prefs would be retired.
The tender is at market price, so I see no reason to refuse it.

I sold all my banking prefs earlier this year, Lloyds and others because I feared attempts to retire them at par, but OH still has some.
So this will be more money looking for a replacement home. I see that HL will allow me to buy NATW.
Hirisk's Metro Bank 5.5s are tempting but the capital gain may not come until 2035 and by then I could be six feet under.

V8

[daveh]

So what happens if you don't tender?

[Padders72]

Well that's come sooner than I expected. I thought it was 2024 when banking prefs would be retired.
The tender is at market price, so I see no reason to refuse it.

I sold all my banking prefs earlier this year, Lloyds and others because I feared attempts to retire them at par, but OH still has some.
So this will be more money looking for a replacement home. I see that HL will allow me to buy NATW.
Hirisk's Metro Bank 5.5s are tempting but the capital gain may not come until 2035 and by then I could be six feet under.

V8

I see no reason to accept it personally. Where is the incentive? Or is just the implied threat of dishonourable behaviour by Lloyds? How has this changed anything, note they specifically say:

'Preference Shares which are not validly tendered and accepted for purchase pursuant to the Offers will remain outstanding after completion of the Offers and shall remain subject to their existing terms and conditions.'

[Holts]

The offer is not at all compelling , there are the inflation and rate rises to take into account but I will continue to take the income and use it to invest elsewhere.

[88V8]

So what happens if you don't tender?

Nothing. You can still hold them, and hope for a better offer at a later date.

The offer is not at all compelling , there are the inflation and rate rises to take into account but I will continue to take the income and use it to invest elsewhere.

The exit yield on the Prefs is c5.6% incl the accrued; I bought some more AXI Axiom this morning (Bond IT) yielding 6.5% and at an 11% discount to NAV. https://www.theaic.co.uk/companydata/0P00016YPY so Axiom is my elsewhere fttb.

I see no reason to accept it personally. Where is the incentive? Or is just the implied threat of dishonourable behaviour by Lloyds?

Perhaps I'm too wary post the ECNs.
But we know that as rates rise the SP will fall, plus I have no desire to end up in a rump, so one way and another I see no downside in selling, given that I can duplicate or better the yield.
Perhaps now Horto has pushed off, Lloyds will behave decently. Perhaps there will be an enhanced offer in future. Perhaps not.

It will be interesting to see how the banks retire their Prefs. OH still has STAC and SAN, but for me it will be academic as I already unloaded all mine.

V8

[daveh]

I hold LLPC at HSDL. Had a look this morning and no sign of the tender offer appearing as a corporate action on my account (yet), so I may not be able to tender my prefs. I'll have another look at the end of the week.

[AleisterCrowley]

Yes, nothing showing last night on HSDL (LLPE)

[AleisterCrowley]

Yes, nothing showing last night on HSDL (LLPE)

Still nowt today

[hiriskpaul]

Hardly a generous offer.

This line may be important:

From 1 January 2022, the Offeror will classify any remaining outstanding preference shares as ineligible for regulatory capital purposes. The legal ranking of the Preference Shares will remain unchanged.

I don't think this is detrimental, but I am going to review the prospectus again to make sure. From memory, I think this might make the dividends mandatory. If so this is actually a positive outcome.

Unfortunately the remaining LLPC we hold now are outside ISAs and SIPPs and this would result in a CGT bill if we tendered. However, the price is quite high at present and there is always that threat of capital reduction out there.

[Gan020]

I don't own these so maybe my thoughts might be helpful.

The offer is similar in pricing to the Natwest offer of about 3 months ago. That got about 15% acceptances so we can guess this offer will get about the same. This will still leave £45m in issue on two of the instruments and £250m on the third so there will be no discernable change in liquidity.

The pricing of both the Natwest and Lloyds issues suggests to me they are not in any hurry to get them off the balance sheet. I would see further offers in the future, maybe annually but probably no more generous than this one. I guess for an institution they will be holding them at the bid on their books so selling at around the offer price is attracting that 15% of sellers.

I would hazard a guess that in x years time after x offers the number in issue will have dropped to a point where Lloyds will be prepared to throw some money at it to get rid of them because the amount of money will be meaningless in the scheme of things to them.

Based on this if you were happy holding two days ago I can't really see a good reason for taking up the offer.


btw isn't there a call on LLPE in 2026 anyway? I'm not 100% sure

[rippleog]

I sold ny NWBD into the tender @176.517 and bought 50% back last month @167.00

So will probably sell my LLPC into the tender .....

but this time I will probably replace 50% with STAB and RSAB....

[yieldhog]

I own some of the LLPC in my SIPP at 93.25, so happy to tender at 167.25. At a yield around 5.5% I should be able to buy something to replace the income.
I own them in my Interactive Investor account which as yet is not showing the corporate action event.

I've been selling most of my long-dated fixed income bonds in anticipation of rising interest rates (and hence falling bond prices). SANB will probably be the next to go. POB has been called and will be redeemed next month. That will just leave me with GACB and MBSP. It should be possible to replace GACB with a higher yield but MBSP is more of a challenge.

Besides the interest rate risk I also want to reduce my risk to single company holdings (Event Risk), so replacements will probably be ITs.

Suggestions welcome.

Y

[yieldhog]

I own some of the LLPC in my SIPP at 93.25, so happy to tender at 167.25. At a yield around 5.5% I should be able to buy something to replace the income.
I own them in my Interactive Investor account which as yet is not showing the corporate action event.

I've been selling most of my long-dated fixed income bonds in anticipation of rising interest rates (and hence falling bond prices). SANB will probably be the next to go. POB has been called and will be redeemed next month. That will just leave me with GACB and MBSP. It should be possible to replace GACB with a higher yield but MBSP is more of a challenge.

Besides the interest rate risk I also want to reduce my risk to single company holdings (Event Risk), so replacements will probably be ITs.

Suggestions welcome.

P.S. Can anyone explain the maths of the incremental interest payment of 0.38118 for the 9.25% LLPC? I think the second half-yearly interest payment of 4.625% is due to be paid at the end of this month.

[Holts]

88v8 .

‘The exit yield on the Prefs is c5.6% incl the accrued; I bought some more AXI Axiom this morning (Bond IT) yielding 6.5% and at an 11% discount to NAV. https://www.theaic.co.uk/companydata/0P00016YPY so Axiom is my elsewhere fttb.’

I had bought some of these back in July and had forgotten about them , trying to re invest some BOI income today after your reminder and find suddenly III will no longer trade them online .

[88V8]

‘The exit yield on the Prefs is c5.6% incl the accrued; I bought some more AXI Axiom this morning ..

I had bought some of these back in July and had forgotten about them , trying to re invest some BOI income today after your reminder and find suddenly III will no longer trade them online .

ii have become a bit of a pain with their 'can't trade' that also embraces MBSP/R, NATW, NWBD, ENQ1, AXI and no doubt others.

AXI they will not even let me buy over the phone, they mumble about needing the KID - which HL have had for months - and then they pretend to not having the cost statement.
Don't know if they are tidying the ship ahead of an IPO or what, but it's a pain.

I bought through HL at 94.6 today.

It's slick & quick to open an a/c at HL. All online, other than a code to verify the bank a/c which will arrive by letter.
One has to sit the 'Complex Instruments' exam, but that's not too much of a challenge.

V8

[BobGe]

So will probably sell my LLPC into the tender .....

Given this offer is not particularly generous personally I would be very happy to see it snubbed by all holders if for no other reason than to make it known to Lloyds that investors have not forgotten the treatment Lloyds dished out in respect of the ECNs.

Having in mind that holders, inc. retail holders, were asked to surrender prefs in exchange for ECNs to support Lloyds (some might say to help prevent the Bank's total collapse) during the GFC, following which Lloyds pretty much stuffed ECN holders at the earliest opportunity, particularly retail holders (likely many of whom had surrendered their prefs), followed by what was believed to be a covert Lloyds backed comments campaign proposing that said retail holders should invest the funds from the forceably redeemed ECNs in Lloyds Ordinary Shares at a time when they were around 60-70p per share. Needless to say the LLOY s/p has been on a falling trend ever since.

[Padders72]

‘The exit yield on the Prefs is c5.6% incl the accrued; I bought some more AXI Axiom this morning ..

I had bought some of these back in July and had forgotten about them , trying to re invest some BOI income today after your reminder and find suddenly III will no longer trade them online .

ii have become a bit of a pain with their 'can't trade' that also embraces MBSP/R, NATW, NWBD, ENQ1, AXI and no doubt others.

AXI they will not even let me buy over the phone, they mumble about needing the KID - which HL have had for months - and then they pretend to not having the cost statement.
Don't know if they are tidying the ship ahead of an IPO or what, but it's a pain.

I bought through HL at 94.6 today.

It's slick & quick to open an a/c at HL. All online, other than a code to verify the bank a/c which will arrive by letter.
One has to sit the 'Complex Instruments' exam, but that's not too much of a challenge.

V8

I too have used HL to top up on AXI recently, held outside a ISA they are pretty much the cheapest I found who allowed them to be traded online. One correction to your list above, ii will allow MBSP/R to be traded, but only by telephone. They will in my experience waive the £50 trading charge if you kick up a fuss about the instrument being removed from online trading for no good reason. I haven't paid the phone fee for my past 3 buys, but wont be buying any more.

I have no intention at all of selling down my remaining LLPD holding though on the basis of this miserly offer.

[BobGe]

It is pretty miserly when one considers that 175p was offered for the NWBD 9%. which resulted in quite a small quite a small take up.
Lloyds are only offering a thin 174.2p for the LLPD 9,3/4% and 167.25p for the LLPC 9,1/4%.

[daveh]

It is pretty miserly when one considers that 175p was offered for the NWBD 9%. which resulted in quite a small quite a small take up.
Lloyds are only offering a thin 174.2p for the LLPD 9,3/4% and 167.25p for the LLPC 9,1/4%.

No sign of the tender appearing as a corporate action on my HSDL account. Having read the useful 'advice' here I'm minded to not tender and wait for a better offer whilst collecting the Divi.