The Lemon Fool

I have already bought some GACB, AV.A and NWBD and would like to buy 2 or 3 more. My current thinking is...

1. NTEA as it is cum, but I am not sure what the net sometimes mentioned means
2. SKIP
3. STAB or STAC
4. ELLA
5. LLPC or LLPD
6. SAN

Any thoughts or comments please.

Given the sad news with what just happened with Bank of Ireland, I would suggest your wasting your time looking at prefs now.

Blagdon wrote:I have already bought some GACB, AV.A and NWBD and would like to buy 2 or 3 more. My current thinking is...

1. NTEA as it is cum, but I am not sure what the net sometimes mentioned means
2. SKIP
3. STAB or STAC
4. ELLA
5. LLPC or LLPD
6. SAN

Any thoughts or comments please.

Here, JWDool mentions having written to Northern Electric regarding, well, as per his post, but apparently no reply.
Make of that what you will.

ELLA are safe, I believe, SKIP yields over 8% which suggests a degree of unease or perhaps poor liquidity, I have no interest in holding Lloyds' paper after their efforts with the ECNs, and I have no view on Standard Chartered or Santander.

I am fat GACA/B, NWBD, ELLA, also BP.A/B, and BWRA which are also regarded as 'safe'.
You might look at MBSP/R if you can get hold of any.

NealMorris wrote:Given the sad news with what just happened with Bank of Ireland, I would suggest your wasting your time looking at prefs now.

Not all lenders will wish to redeem, and if they do then a 10%ish capital uplift is not to be sniffed at, I think.

V8

NealMorris wrote:Given the sad news with what just happened with Bank of Ireland, I would suggest your wasting your time looking at prefs now.

As in picking up an 8% yield with the possibility of instant 10 capital gain.

I did not get a reply from NTEA on the potential "cancellation" at par, however, the "Dear CEO" letter from the FCA indicated that pref issuers had to clarify their positions back in 2018. I don't believe that any issuer will try to do an "Aviva" at this stage, the reputational risk isn't worth the small gain, in particular given many of the prefs are trading much nearer par anyway.

I do think we are going to see a bunch of tender offers towards 2026 as the insurance capital situation comes to a head re: prefs. However, my thoughts are that GACA, GACB, AV.A, AV.B, RSAB will tender ~10-15% above market (around the same as BoI) and on this basis they are a great buy around currently levels, given they are paying out >7%.

I would favour cum rather than non-cum, however, NWBD is a great note given the advantages of the specifics of that security. I also think MBSP/R are worth holding along with other PIBS given they are likely to be tendered above market prices at some point. The "hard to buy" notes are certainly worth having if you can get them inside a tax wrapper (ISA/SIPP) e.g. SKIP, CVBP, LBS. The capital build on those names is will above the required CET1 levels and provide huge amounts of capital.

If I had to pick out a single name, I'd go for GACA. Its cum, likely to be called at a premium, its paying out a generous coupon and it is Aviva - probably one of the safest companies in the UK.