Lloyds Prefs Tender Offer

[daveh]

I am wondering what are the main risks of not accepting the offer? (I hold LLPC)

What exactly does this mean ? "From 1 January 2022, the Offeror will classify any remaining outstanding preference shares as ineligible for regulatory capital purposes"

Is this statement more beneficial to Lloyds reporting results and does it mean they can change or withdraw in the near future the Prefs?

My assumption is that the most-likely risk is that Lloyds somehow manage to "repay at par".
So that means LLPC, which is currently trading at 166.85 will be forcibly repaid at only 100.

I assume there would be a substantial outcry if they shafted all the institutional shareholders like that, so Lloyds are offering them a way out. Who knows, behind the scenes they might even have told major shareholders that is their plan.

I continue to hold.
Rover

I'll wait and see the institutional take up of the offer before deciding. We should find out Monday and then (for my broker) I have until 5th December to decide what to do. I was having a search on the web for how much of each Pref. is still outstanding. I couldn't find anything on LLPC but found a figure of £97.14m for LLPD and £63.25m for LLPE (on market watch | think).

[GoSeigen]

I am wondering what are the main risks of not accepting the offer? (I hold LLPC)

What exactly does this mean ? "From 1 January 2022, the Offeror will classify any remaining outstanding preference shares as ineligible for regulatory capital purposes"

Is this statement more beneficial to Lloyds reporting results and does it mean they can change or withdraw in the near future the Prefs?

My assumption is that the most-likely risk is that Lloyds somehow manage to "repay at par".
So that means LLPC, which is currently trading at 166.85 will be forcibly repaid at only 100.

I assume there would be a substantial outcry if they shafted all the institutional shareholders like that, so Lloyds are offering them a way out. Who knows, behind the scenes they might even have told major shareholders that is their plan.

I continue to hold.
Rover

Yes, I think if the capital reduction route were taken it would be a multi-stage process now. That process began actually with the rise in preference share values far above par; then the Aviva incident, which put the issue of capital reduction on the table.

This tender might be the next step: it is what the moaners on this site called for: a tender at market value. Remarkably some of those moaners now seem determined not to take part in the tender at their preferred price! -- presumably hoping that their shares will forever pay a dividend and maybe get even more valuable than at present.

However, if we are on the road to a capital reduction the next logical step might be an announcement of intention to seek shareholder approval to reduce capital followed by a tender at a lower price, between the current one and par, possibly with a vote on a mop-up clause or similar. And if that doesn't clear out holders, then finally the capital reduction.

But this is all speculation on my part.


GS

[JohnEdwards]

Still nothing from Hargreaves Lansdown - I've messaged them tonight.

HL notices received this morning.
Subject to seeing a surprisingly high rate of acceptance from institutions(if we are allowed to know it), I remain minded to hold on.

[simoan]

Still nothing from Hargreaves Lansdown - I've messaged them tonight.

HL notices received this morning.
Subject to seeing a surprisingly high rate of acceptance from institutions(if we are allowed to know it), I remain minded to hold on.

I wouldn’t be guided by Institutions tbh - I don’t trust them or Lloyds. I have already decided to accept the offer as I am using the tender to increase cash and I’m not that interested in fixed interest stuff - Mine were all acquired at a significant discount during the GFC at less than half the current price. I have already switched the amount of FI I want to continue holding into ELLA with no loss of income even including the accrued.

Si

[88V8]

We, or rather the wife, sold LLPC and LLPD today, but in the market not the tender. So unless the buyer tenders them, it will not count towards the tender percentage.
A small dealing cost but she has the ii offset to use up.

OK, we could have done that any time but it was an opportunity to nudge her... I sold mine a while ago along with all my bank Prefs other than some NWBD.

As Simoan say, ELLA might be a safe parking place if we want more FI, or BWRA or NWBD, or for that matter AV.A/B as I'm sure they won't try any funnies.
Wife can't buy AXI otherwise that might have been at least a partial home.

V8

[XFool]

We, or rather the wife, sold LLPC and LLPD today, but in the market not the tender. So unless the buyer tenders them, it will not count towards the tender percentage.
A small dealing cost but she has the ii offset to use up.

OK, we could have done that any time but it was an opportunity to nudge her... I sold mine a while ago along with all my bank Prefs other than some NWBD.

Why did she do that? Wouldn't she have got a better price in the tender rather that selling at the bid price?

[88V8]

Why did she do that? Wouldn't she have got a better price in the tender rather that selling at the bid price?

If I can read her scribble, she would have got about 0.2% more at the tender price.

V8

[Breelander]

...I have now phoned Equiniti for clarification. Apparently for a retail certificate holder like myself the tender offer documents are to be sent by post to my registered home address on 19th November, which is why I have not heard anything yet. I suspect something similar may apply to sending the documents to your brokers.

As promised, the tender documents for my certificated holding of LLPD have now arrived by post, with a reply deadline for retail holders like myself of 1.00pm 9th December.

[XFool]

As promised, the tender documents for my certificated holding of LLPD have now arrived by post, with a reply deadline for retail holders like myself of 1.00pm 9th December.

Mine are LLPE and the form says "by 1.00 p.m. on 6 December 2021". This is for a holding in LBGSA Nominees.

[ResourceOgre]

Have about 40k LLPC. Taking the tender offer as, IMHO, there is a non-zero risk of a later tender at worse terms.

I hate to part with a reliable payer. But I need to select something to sell to move cash from a SIPP, this comes at the right time and without the usual spread on dealing fixed income: I imagine liquidity in these will suffer which will increase spread in the future.

Farewell oh faithful and trusty Black Horse. At this point, tender-wise, you are an old nag fit for the knackers.

[Alaric]

I imagine liquidity in these will suffer which will increase spread in the future.

That's a good reason for accepting the offer as well as the problem that if the Bank of England matched base rate to RPI inflation, the price would tumble.

[ResourceOgre]

I imagine liquidity in these will suffer which will increase spread in the future.

That's a good reason for accepting the offer as well as the problem that if the Bank of England matched base rate to RPI inflation, the price would tumble.

Agreed. I thought "lower for longer" about interest rates, following the Global Financial Crisis, and turned out to be right (**). I think "higher for longer" about inflation, which increases the magnitude of the risk you mention.

Also, I possess an utter rag-bag stamp collection of shares and investment accounts of different providers and types.... with LLPC present in all of them. So this will be a simplification.

Also, I find selling anything very psychologically tortuous. The tender offer lowers the threshold of psychic energy required for action.

As a portfolio de-clutterer might say "This one no longer sparks joy."

(**) No pundit, me. Got it wrong about Brexit and Trump.

[daveh]

Tender offer results is out:

https://www.investegate.co.uk/lloyds-ba ... 02001307T/


£198,065,600 6.475% Non-Cumulative Preference Shares4 GB00B3KSB568
Amount tendered £3,691,321 purchase price 112.050% Amount outstanding after settlement £52,780,890



£300,000,000 9.25% Non-Cumulative Irredeemable Preference Shares GB00B3KS9W93
Amount tendered £37,319,867 purchase price 167.250% Amount outstanding after settlement £262,667,862



£100,000,000 9.75% Non-Cumulative Irredeemable Preference Shares GB00B3KSB238
Amount tendered £7,168,493 purchase price 174.200% Amount outstanding after settlement £48,572,393


Doesn't look as if the tender was popular among institutional holder, so I think I'm going to retain my LLPC. Looks like most of the LLPC remain. LLPE and LLPD looks like they are much reduced compared to the original issue (less than half left), but take up not high for any of the three.

[hiriskpaul]

I am relieved to see there was little institutional interest. We will hold as we don't want to book any more capital gains this year. All our remaining LLPC are outside SIPPs/ISAs, but I probably would tender any I had in SIPPs/ISAs. LLPE we sold a few months ago as the YTM had dropped very low.

My daughter holds some LLPD as a certificate - I gave them to her years ago along with NWBD and SAN to pay her income when she was a student. The forms arrived on Saturday for these and we may tender as she is looking to buy a flat next year.

[Kr1ck]

It doesn't seem like the institutions were very interested which means Lloyds haven't dropped any hints to them about redeeming at par in subsequent offers. I can't see Lloyds wanting these hanging around as they are effectively expensive and useless to them but I also don't think there are enough of them to risk the reputational damage of redeeming at par (it would undoubtably end up in the Supreme Court and they only narrowly won the ECN case).
I think in the ECN case they dropped hints that they could redeem at par to encourage take up of their ungenerous offer and I fail to see why they haven't done so here when the offer is at market price. Any insight from Goseign would be welcome.

Luckily I'm not coming down with them (having mostly swapped into equity - a trade yet to flourish!) so it is more of a muse for me.

[GoSeigen]

It doesn't seem like the institutions were very interested which means Lloyds haven't dropped any hints to them about redeeming at par in subsequent offers. I can't see Lloyds wanting these hanging around as they are effectively expensive and useless to them but I also don't think there are enough of them to risk the reputational damage of redeeming at par (it would undoubtably end up in the Supreme Court and they only narrowly won the ECN case).
I think in the ECN case they dropped hints that they could redeem at par to encourage take up of their ungenerous offer and I fail to see why they haven't done so here when the offer is at market price. Any insight from Goseign would be welcome.

Luckily I'm not coming down with them (having mostly swapped into equity - a trade yet to flourish!) so it is more of a muse for me.

If I could be so bold, it wouldn't even go to court. The right to reduce capital is enshrined in company law, it really is as unambiguous as could be.


I don't claim any special expertise, but in my earlier post I guessed that if LBG were so inclined they could make a further tender offer including the hint/threat of capital reduction and with less attractive pricing than the current offer. Only after that would the capital reduction proposal be put to shareholders.

Personally I think LLPC is already too expensive at the current 1.5% real yield (or 4.3% spread over very expensive gilts or 2.8% yield-to-repayment in 20 years time, or 0.2% spread over the bullet-proof NWBD) which is why I hold none.

One must keep in mind that shares being perpetual means that shareholders have no right to demand repayment from the company; but the company always has the right to repay them at its option (with the approval of shareholders).


GS

[Mikkko]

Hi all,

I have not been on TLF for some 4 years, in that time I have reached State Pension age.

I also hold LLPC and LLPD in a SIPP from which I am taking income (I have recycled some of the Tax Free Lump Sum into an ISA, so even better).

About one third of the SIPP/ISA is in LLPC+LLPD. Plus also some LLOY so I can understand why Lloyds want to get rid of them!

At this stage, I am looking for income rather than Capital Growth, so the 5.6 yield is very attractive. Where else can you get this return on a relatively secure investment?

So I was not tempted at all by the offer, as appears to be the case for the most holders. I breathed a sigh of relief when the results came out...

There are 2 words that help me sleep at night - "IRREDEEMABLE" and "PREFERENCE" !!

[GoSeigen]

Hi all,

I have not been on TLF for some 4 years, in that time I have reached State Pension age.

I also hold LLPC and LLPD in a SIPP from which I am taking income (I have recycled some of the Tax Free Lump Sum into an ISA, so even better).

About one third of the SIPP/ISA is in LLPC+LLPD. Plus also some LLOY so I can understand why Lloyds want to get rid of them!

At this stage, I am looking for income rather than Capital Growth, so the 5.6 yield is very attractive. Where else can you get this return on a relatively secure investment?

So I was not tempted at all by the offer, as appears to be the case for the most holders. I breathed a sigh of relief when the results came out...

There are 2 words that help me sleep at night - "IRREDEEMABLE" and "PREFERENCE" !!

If you don't mind me saying so, I don't think these terms mean what you think they mean.

-Irredeemable: this means that the shares were issued without redemption terms so may not be redeemed without reference to the shareholders or creditors of the company (via a high court approval). In other words it means that one of only three legal ways to purchase the shares is unavailable to the company. The other two ways still exist (purchase in the market and capital reduction).

-Preference: this means that before any capital can be repaid to ordinary shareholders (e.g. in a capital reduction) the preference shareholders MUST have their shares purchased first. So if you are relying on not having your capital repaid this feature provides for exactly the opposite to happen. [Not 100% relevant but it also means they must be paid their dividend if junior shareholders get a dividend.]

The fact is any preference share holder buying these prefs is paying a premium over the nominal value of their shares. The only justification for that premium is the ability to keep receiving coupons at a rate (9.25%) much higher than prevailing long-term yields (c5.5%). You must take into account the risk that the ability to keep receiving those coupons may disappear. With NWBD that risk is negligible; with LLPC it's significantly higher.


GS

[dealtn]

I also hold...About one third of the SIPP/ISA is in LLPC+LLPD. Plus also some LLOY ...

There are 2 words that help me sleep at night - "IRREDEEMABLE" and "PREFERENCE" !!

Might a prudent third to add to your vocabulary be DIVERSIFICATION?

[stockton]

If you don't mind me saying so, I don't think these terms mean what you think they mean.

-Irredeemable: this means that the shares were issued without redemption terms so may not be redeemed without reference to the shareholders or creditors of the company (via a high court approval). In other words it means that one of only three legal ways to purchase the shares is unavailable to the company. The other two ways still exist (purchase in the market and capital reduction).
GS

You claim that this is what "irredeemable" means but most of the rest of the world, including the current Governor of the Bank of England, understand it to have a different meaning in normal parlance. The word normally used for the situation which you describe is "undated".