Lloyds Grp 9.25 Discussion Threads

[skylaunch] 07/3/2009 11:32

I guess it's down to how bad the real economy is. It seems counter intuitive to think in terms of 'melt down' after so many years of prosperity but that is exactly what is happening out there and it must, at some point come home to roost.

That must be why the yields on these instruments are so high - people do not believe they will continue to be paid, or at least they perceive that the probability of default is too great to risk capital on.

Who's left? Why us buccaneering private investors and precious few others, going on trading volumes.

Are we right? I don't have any idea really but profit is defined as return on risk - so let's hope we profit from this enormous risk.

Anyway, thanks for the extract FBRJ - I do believe we will get paid now -this time at least.

[supernumerary] 06/3/2009 23:34

I think it's mostly out of Lloyds hands at the moment.

The banking system needs banks and bankers to have confidence in each other. If the Treasury 'wins' its current battle with Lloyds it will again undermine this confidence and the mandarins will have to their credit a Pyrrhic victory that could reduce our banking system to cinders. They need to step back and let the bankers have their (sadly undeserved) victory, for the greater good. But I don't think humility figures large on the CVs of many of the Treasury grandees.

[solomon9] 06/3/2009 22:32

The big picture is Lloyds needs to reassure that it will not need to be nationalised. So far the church is more disbelievers than believers. If the govt stake surges up then we are in the same boat as RBS. Yes they might still pay the coupon but the nationalisation risk will be hanging around until 2010.

[supernumerary] 06/3/2009 21:27

fbrj - thanks for that - the others I've seen lack the 10 BD restriction but are otherwise very similar.

It seems pretty unambiguous to me - I really don't see how they can avoid making this payment, short of some Deus Ex Machina such as the Government, intervening.

Without that, speaking as a non-lawyer with a few glasses of wine and a heady 65% yield on his handful of US ADR's to confuse his brain, I'd say they'd surely be in breach of contract?

[fbrj] 06/3/2009 20:58

Supernumerary and others - here is the relevant extract from the LBG Pref share document re the 6.475% prefs...which have gone ex-div and are due to be paid on 15th March - which happens to be a Sunday...so I guess the payment date will be Mon 16th. 10 business days before that is 2nd March (now passed).

3 Declaration of Dividends
If, in the opinion of the Board of Directors or the Committee, the distributable profits of the Company are sufficient to cover the payment, in full, of dividends accrued on the Preference Shares during the Dividend Period immediately preceding the relevant Dividend Payment Date and also the payment in full of all other dividends and other amounts stated to be payable on such
date on any Parity Securities in issue (including any arrears of dividends or other amounts on any such Parity Securities which have rights to cumulative dividends or other amounts), the Board of Directors or the Committee may:
(a) declare and pay in full Preference Dividends on the relevant Dividend Payment Date; or
(b) in their sole and absolute discretion resolve at least 10 Business Days prior to the relevant Dividend Payment Date that no Preference Dividend shall be declared and paid or that a Preference Dividend shall be declared and paid only in part.


If, at least 10 Business Days prior to a Dividend Payment Date, the Board of Directors or the Committee considers that the distributable profits of the Company are insufficient to cover the payment in full of Preference Dividends and also the payment in full of all other dividends or other amounts stated to be payable on such Dividend Payment Date on any Parity Securities (including
any arrears of dividends and other amounts on any such Parity Securities which have rights to cumulative dividends or other amounts), then, subject as provided above on the restrictions relating to the Company's capital adequacy requirements, the Board of Directors or the Committee may declare a reduced Preference Dividend. This will be paid in proportion to the dividends and other
amounts which would have been due on the Preference Shares and any other shares and other instruments of the Company on such Dividend Payment Date which are expressed to rank equally with the Preference Shares as regards participation in profits (including any arrears of dividends and other amounts on any such Parity Securities which have rights to cumulative dividends or other amounts) if there had been sufficient profit.

As soon as practicable after resolving that no Preference Dividend shall be declared and paid or that it shall be declared and paid only in part, the Board of Directors or the Committee shall give notice thereof to the holders of the Preference Shares.

[p@] 06/3/2009 20:41

solo-The change was probably insisted upon because the Gov. Pref had to be the same terms, and they knew it was too big an Issue to be Guaranteed div.If the insurance terms under negotiation now involve convertion of the Gov Pref to Ord.this is good for us and our Div..IMO

[solomon9] 06/3/2009 20:08

Its so fly by night though isn't it? that episode over Xmas insisting on the covenant change, I mean what was that all about? totally damaged confidence and the paltry 3/8% payout, it looked like a cheap tip, and it was.

[p@] 06/3/2009 12:11

We will get our Div,don't worry.

[skylaunch] 06/3/2009 12:11

10 working days is in the HBOS takeover dox - and frankly we must be ready for it not to be paid with the way things are shaping up, but as OBR said, it would put the cat amongst the pidgeons re pensions etc......

[supernumerary] 06/3/2009 12:05

bluetooth - where did the '10 working days' come from? If that's the case, it's already passed of course....

[colinc57] 06/3/2009 11:20

If they issue more ord.. doesn't that mean that they have to pay existing prefs div... will have to sort out the paperwork

[solomon9] 06/3/2009 10:40

Market not liking the idea to convert the 12% prefs into ords "to save cash".

[bluetooth] 06/3/2009 09:55

SLJ - yes LLPE is the 6.475% prefs which went EX Div earlier but dividend could be cancelled up to 10 working days before payment.

[slj] 05/3/2009 21:13

bluetooth said that he took it that the div on the LLPE will be paid - those are the 6.475% prefs.

[rat attack] 05/3/2009 20:35

SLJ - that relates to 6.475% prefs, not 9.25% prefs!!

[slj] 05/3/2009 20:16

It says here that the payment date is 16 March 2009:

[bluetooth] 05/3/2009 18:27

As there has been no announcement today, I take it that the div on LLPE will be paid - any thoughts.

BT

[kimboy2] 05/3/2009 07:26

Are the RBS prefs 'dangerous' or at least more dangerous than the rest.

The danger is if RBS goes bust or is nationalised without compensation. If that happened then the knock on effects on the financial sector would be immense.

I suspect that Lloyds would immediately go the same way and many of these insurance companies, who are stuffed to the gunnels with prefs, would be defaulting.

I don't necessarily think that market interest rates are an indicator of risk at the moment.

[old boy returns] 04/3/2009 22:39

"OBR - I get the impression you know this area quite well - what do you recommend?"

Future Financier - I am pretty new to this area but am researching it thoroughly. I recommend registering with Collins Stewart who will then e-mail you their weekly fixed interest lists and offers which are a good starting point for research. Nobody really knows how all this is going to pan out which is why there is so much fear in the fixed interest market at present. As I have said I think the best approach is to go for a spread across a number of securities with varying risk profiles ranging from Nationwide PIBS yielding 8-9% at the 'safe' end to the US listed RBS prefs yielding 50-60% at the 'dangerous' end. In between you can take your pick of many other big names in the 10-25% range. It should be possible to construct a portfolio of, say, 10 fixed interest stocks with a 20%'ish yield whereby even if 1 or 2 are wiped out you still have a decent yield and potential to recoup lost capital.

[lord gnome] 04/3/2009 19:19

Is that a PIB solomon9? If so, the yield is quoted gross and subject to tax at 20%. This would reduce the effective yield below the AV prefs. Or am I talking total balls?

[solomon9] 04/3/2009 18:43

Britannia 5.555% interesting as well at 62 paying 8.96% pretty safe institution. Hey if Nat West 9% is paying then LLPC will pay too.

[lord gnome] 04/3/2009 12:59

FF - AV.a and AV.B are cumulative prefs, so no worries about missed divis unless the whole operation goes t!ts up. I hold equal amounts of both and because the dividend payment dates are staggered, they provide the equivalent of a quarterly income. The divi is net as well, so approx 8% is the equivalent of 10% APR in a Building Society a/c. - if you could get it.

[lord gnome] 04/3/2009 12:58

NWBD has gone ex-div today. The price drop is a reflection of that and nothing else.

[renew] 04/3/2009 12:52

NWBD
Its not when the divi is paid that the price drops its usually the record date
which I havnt checked but is round about now.

[bobdouthwaite] 04/3/2009 12:30

skylaunch - the divi on NWBD is to be paid on 16 April; not sure why the share price has dropped