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LLOYDS is going to FLY

lse:lloy

#3638

Just out of interest, is there something you don’t like about RAVP @PrefInvestor1 ?
You mentioned they’d guaranteed their pref shares and its price appears reasonable.
I noticed that they usually offer choice of new shares or cash too as divis… don’t know if that’s commonplace among all the others.


#3639

Hi Again @J_Westlock, Well I am holding them ATM and the yield and potential is great. But the company is a sort of Russian REIT dealing in warehouse space and now office space too. However it is run out of Guernsey by some Brits who all have have huge holdings in their ordinaries (RAV), prefs (RAVP) and convertibles (RAVC). Thats good in many respects as they have lots of skin in the game !.

However a certain Mr Woodford was one of their major investors, his demise caused them some pain, the company ended up buying the shares and then selling them on to third parties from what I understand.

And the same is now happening again with Woodfords mate Burnett (at Invesco) who also created huge holdings that Invesco are now saying that they want out of. These holdings are EVEN larger than Woodfords so present more of a problem - but again they are planning a buyout I think just not clear where the money is coming from ATM. They have promised to provide an update in January. If they DO proceed it could be massively positive for all of the share classes.

And if it wasnt for that the share is consistently dogged by Russia being affected by US sanctions and the like. Being a UK company they report in GBP but all their assets are in Russia and most now receive rent in Rubles or Euros. This clearly presents some challenges. Last year they declared a loss because they did a property valuation which on the face of it showed a big drop because of the currency issue.

So I would say its high yield for a reason - comes with some risks. But as I say I am holding ATM…

ATB

Pref

PS Yes and they offer a SCRIP option, if you have a broker who will let you use it…


#3640

Yes, I read about that. However, there doesn’t appear to be any real risk of Raven Property Group going out of business and I’m sure they have learned to live with US sanctions, I’m note sure how that affects their core business.
Isn’t the idea of Prefs that they are unaffected by the performance of the company?

Ah yes… the old scrip divi problem… will have to recheck on that with my brokers as been a while since last did that.


#3641

Only up to a point. If the company get into trouble financially then its prefs will crash as quickly as anything else…

ATB

Pref


#3642

The idea is you stand ahead of ordinary shareholder if the compay is dissolved. But, you are still behind secured and unsecured debt holders and creditors.

So the trading of a company is importants to a prefs holder, but you could argue the balance sheet even more so.

In theory they should be less volatile than “ordinary” shares…but, they fall short of the security of secured senior debt.


#3643

Take a look at REA Holdings if you want to see what can happen when things go wrong. The company produces palm oil and the bottom dropped out of their market. They have prefs which are actually cumulative that some brave souls are buying hoping to pick up payments that have been skipped because they couldn’t pay them…

These at least have a chance of recovering. If a company gets into real trouble then all of their share classes quickly move towards zero and being a preferred shareholder won’t help you much…

ATB

Pref


#3644

I should also say prefs have seniority over the payement of income to ordinary shareholders, but usually on a fixed basis. It practice that means prefs holders should expect to be paid before a dividend is.


#3645

That’s true, but I’m hoping the REA Holdings 8.75% 2020 does, which had a high double digit YTM when I bought it.
In terms of the company getting into trouble it would be ahead of both the ordinary and prefs for any distributions.
For the record it’s an unsecured, highly illiquid debt issue.


#3646

Yes, of course. I wasn’t meaning to suggest that company performance isn’t crucially important but just that having read about what’s happening at Raven Property Group I don’t think it is in any real danger of going under and that the Russia-related ‘issues’ aren’t something that particularly concerns me unless they start to directly affect their ‘warehousing’ business.

I guess you pay more in the price partly as a reflection of the security of the company/liklihood of them keeping on paying out.
Whilst I’m on that subject… I also noticed that ‘STAB Standard Chartered 7 3/8 %’ has a reasonable price too compared to others… again… is there some reason for that you’re aware of?


#3647

Hi @devonplay, It’s my understanding that companies are not permitted to pay dividends on their ordinaries if they haven’t paid out to their preference shareholders.

Did you find that bond on WiseAlpha ?. I guess they’ve got lots of land and trees and machinery and other assets that could be used as the basis for their SenIor Debt. A step too far for me though !.

Don’t I recall that you have some RAVP ?. Or did have. What’s your view of the current situation there. Did you agree with the summary that I gave in my previous post to JW ?.

ATB

Pref


#3648

That’s correct. You have first call as far as equity holders go. In practice debt holders will get paid first. You get"fixed" payments, generally speaking, as a pref holder where as ordinary holders should always get "variable’ payments based on performance of the business. As REA demonstrates you can have that pref payment stopped.

I do I hold over 50 notes with them now. Because there are no dealing charges as such, it’s a management fee (that I dont pay at the moment), then it’s possible to hold a very diversified portolio with them in small denominations per line. As far as REA is concerned all payments are on track so far. Over time I’m hoping to have 60 lines with them with a yield of c8%, YTM c12%

WA offer their product as “lower risk” product to P2P, and I guess over time to owning single company equities, where as I use it to build a diversified portfolio of high yield and some times junk bonds and fixed interest instruments.

Yes I hold both RAVP & RAV. 90/10. I like the business and overall I’m comfortable with the risk profile.

I think I have a higher risk tolerance than you, but not so high that I’m happy to hold renewable IT’s, for that class of asset I prefer the debt issues when I can. On that point, I’ve recently been looking at Downing’s unlisted vehicles in green power generation.


#3649

Re risk, yes I think you do.

I’ve had my renewable ITs since they were MUCH lower and they have gained value very nicely. I agree that the premia today are VERY large and off-putting - though many still seem happy to buy. Lets face it the yield is still pretty good and renewables are very popular given all the climate change emphasis. I plan to sell my BSIF & UKW soon, just as soon as I find something else that I want to buy… Wont be doing that all the while this rally is going on though !.

Take Care

ATB

Pref


#3650

“premia today are VERY large” & “very popular” - in investing terms not words I like LOL

I think it’s important to have exposure to renewables, I’d just like to find an alternative to the IT’s. I certainly will be giving ETF’s in the space a miss. Popular always worries me.


#3651

Hi Again @J_Westlock, I have no issues with Standard Chartered ATM, so I think STAB and STAC are OK on the investment security front (just my opinion though note - it might not be true !). They are in a better place than HSBC IMHO see link below:-

I agree with this, thats why BPs 8% prefs cost more than others yielding more. But I think the issue is not so much about price but about yield. The key questions for me are “what is safe enough” and “how much yield can I get”.

I have and maintain my yield calculator for all of the prefs and the figures for a £10,000 investment as of today are as follows:-

image

Note that I have ordered this by yield. There is only a spread of 0.7% across all of my favourites (ignoring RAVP). RAVP is an outlier that is riskiest but offers the highest yield. ELLA is the Church of England so is pretty safe. So what I do is take a personal view on safety/security of the issuing company and then typically buy the best yield on offer.

But you must do whatever you feel comfortable with. I think STAB is OK. I hold it ATM, but then I bought at 115…

ATB

Pref


#3652

any views on Interest Rate cuts later this month ?
how likely ?


#3653

Someone said yesterday (I think) that the market was pricing in a base rate cut… do you know what they were seeing that supported that?

I suspect that there will be no change.


#3654

LONDON (Reuters) - The Bank of England is closer to cutting interest rates next week than at any time in the last three years, as governor Mark Carney chairs his last policy meeting and Britain finally leaves the European Union.

Growth at the tail end of 2019 slowed to its weakest since 2012, prompting Carney and two other policymakers to speak publicly about the possibility of a rate cut, adding their voices to two others who had already voted for looser policy.

But there has been a bounce in business and consumer sentiment since Prime Minister Boris Johnson won re-election on Dec. 12 with a bigger than expected majority. Twinned with a tight labor market, this undermines the case for a cut by Britain’s central bank.

Friday’s flash purchasing managers’ index (PMI) was the strongest since September 2018, reinforcing economists’ doubts about the wisdom of a rate cut now.

“In light of today’s PMI and other recent surveys, there is perhaps more value in waiting for more data before using up valuable and limited monetary policy ammunition,” HSBC’s chief European economist Simon Wells said.


#3655

The euro was also weaker across the board this morning after the European Central Bank (ECB) reiterated that interest rates would be “at present or lower levels “ until inflation is near its goal. ECB president, Christine Lagarde, reiterated that “an ample degree of stimulus is still needed to boost inflation” and that she “hopes” to decide on a concrete strategy later this year. She did however note that there is “some sign of a moderate increase in inflation” and that the central bank will be looking “at the negative side effects of negative rates”.

Rate cutting doesn’t appear to be isolated to the Bank of England. Because In the UK, chances of a rate cut have now receded to around 47% from highs of 76% a few days ago.


#3656

I can see the rationale for not doing anything when rates are already so low. However I suspect that the GBP / USD exchange rate might provide the best guide to what’s going to happen.

Rising GBP = no rate cut, Falling GBP = rate cut ?.

Just a theory, GBP falling ATM…so FX community expecting a rate cut.

ATB

Pref


#3657

I think they are but I think Carney will want to leave it for the next governor if he feels he possibly can.