GoSeigen wrote:Mikkko wrote:Hi all,
I have not been on TLF for some 4 years, in that time I have reached State Pension age .....
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
Thank you GS for your considered reply.
I did actually look at NWBD back in 2012 - I still have the spreadsheet...
Bond Price Not. Rate Yield Issue
LLPC 74.5 9.25 12.42% £300m
LLPD 79.6 9.75 12.25% £100m
NWBD 103 9.00 8.74% £180m
As you can see the LLPx prefs had a yield of over 12% (although suspended at the time)...
and NWBD was under 9%.
So LLPx it was.... I've done very well out of them
But I take on your point - and that of dealtn as well.
The yields of LLPx and NWBD are now very similar so it makes absolute sense to swap some over.
And probably half my LLOY as well methinks.
But I still intend to cling on to some LLPx - unless they make an offer around 200p !!
Regards
Mick