Lloyds Grp 9.25 Discussion Threads

[nickcduk] 27/4/2009 08:22

I have been mopping up some more LLPF but am nearly done so happy to disclose what price I have been picking them up at. You can get them at £275 in size. Get your broker to earn his keep and pitch at that level. If they don't bite your hand off straight away then leave the order with them. It will get filled, or at least it was getting filled up until Friday.

[jonwig] 20/4/2009 08:03

Hoveite - thanks for your post, and I hope your reading is correct, as I intend holding my LLPC for some considerable time, all being well!

[hoveite] 20/4/2009 07:19

Jonwig - I don't think the substitution clauses would allow them to lower the coupon.

These clauses say that the prefs could be substituted for "Qualifying Non-Innovative Tier 1 Securities"

The definition of "Qualifying Non-Innovative Tier 1 Securities" in the prospectus includes :-

"... they shall (1) include a ranking at least equal to that of the Preference Shares, (2) have the same dividend or distribution rate or rate of return and Dividend Payment Dates from time to time applying to the Preference Shares, (3) be issued in an amount at least equal to the total number of Preference Shares multiplied by £1, (4) comply with the then current requirements of the FSA in relation to Non-Innovative Tier 1 Capital, and (5) preserve any existing rights under the Preference Shares to any accrued dividend which has not been paid in respect of the period from (and including) the Dividend Payment Date last preceding the Substitution Date to (but excluding) the Substitution Date ... "

So this clause doesn't look to me like it's intended to give them a means to bilk the pref shareholders.

Standard disclaimers :- I'm not a lawyer, I don't work in finance, I haven't read every word of the prospectus, the prospectus may have been written by some tricky bankers who are out to get us etc. etc.

[holts] 19/4/2009 21:45

you would think as the lloy ord price strenghtens then the greater the chance of the govt holding not increasing much , therefore these should be strenthening further.

[solomon9] 19/4/2009 16:29

Lord Gnome

You are "dear leader" of this blog. Rock on mate.

[kimboy2] 16/4/2009 08:39

I can see why the banks do it, but isn't it just substituting Tier 2 for Tier 1 capital as in the prefs prospectus except it is at less than par ?

I find it difficult to understand why holders would do it though. An explanation of why they are doing so would explain why the LLOY and RBS prefs have been so ridiculously mispriced, IMV.

[jonwig] 16/4/2009 08:25

Kimboy - I think the idea there was to book a profit by buying the tier 2 debt below par (it's on the balance sheet at par). The profit is then part of tier 1 capital.
And it's tier 1 capital which everybody is concerned about.
All the banks seem to have been doing similar things.

[kimboy2] 16/4/2009 08:16

Isn't this substitution what they have done already with some on a voluntary basis;



I would preume if it was compulsory then it would be at par.

[jonwig] 16/4/2009 07:24

I forgot the substitution clause was in all the prefs - so that wouldn't explain any price discrepancy - maybe it comes down to liquidity?

Why they have the substitution clause is unclear: as I see it they don't have to, but can use it to pay a lower coupon, redeem, etc. if the current coupon is onerous, as it may turn out to be.

As to what the different types of capital are, prefs and ords are described as tier 1 - capital on the balance sheet which can absorb losses and where failure to pay divis or redeem doesn't trigger any clauses elsewhere.
So if they say they can substitute the prefs with tier 1 securities it really means substitute with other prefs (or even ordinary shares).
The point about the "tier 1" is that it is capital at risk: the issuer determines whether to pay divis or redeem.

[zangdook] 16/4/2009 06:02

Incidentally, what was happening with the price on LLPF yesterday afternoon? It looks like a narrowing of the spread - sells were cheaper but there weren't any buys (unless 75 at mid was a buy) to tell whether that's all it was. Narrowing of the spread would be nice, and perhaps justified by the volume traded (503 being equivalent to 503k, cf 398k for LLPC, 92k for LLPD and 151k for LLPE, all on substantially smaller spreads).

[zangdook] 16/4/2009 05:55

The same paragraph on substitution is in the prospectus for LLPC, D and E, as well as F. I also would like to know what it means in simple terms

[lord gnome] 15/4/2009 23:23

Added to header as requested.

[kimboy2] 15/4/2009 21:08

Perhaps it would be an idea to put the prospectus for thses prefs in the header;



The LLPF provides for 1.31% above LIBOR in 2015. I suspect that when the great day comes it won't be a much different from the present rate. It may indeed be advantageous as it would have an element of quasi index linking.

The substitution clause on page 34 provides for it to be substituted for Tier 1 Securities.

Can anyone explain the significance of this ?

Preferably in words of one syllable.

[jonwig] 15/4/2009 16:41

nick - LLPF are fixed until 2015, when the rate becomes floating, tied to LIBOR. They are also liable to substitution - ie. could maybe be purchased or substituted below par.

[holts] 15/4/2009 16:32

I dont think they are

[nickcduk] 15/4/2009 16:13

Other than the spread, why are llpc so much more expensive that llpf?

[solomon9] 15/4/2009 15:44

Gone ex coupon today, happy days, good two way trade, add in decline stock is up tuppence. Reckon they'll hit 75/

[lord gnome] 15/4/2009 12:10

Yes - I've been under the water with my stocks for so long now that I don't remember what it is like to see so much blue about the place. yesterday I actually showed a profit for the year to date for the first time - mostly thanks to a sterling showing from my prefs.

[nickcduk] 15/4/2009 10:59

Many thanks. Does anyone know where I can find the exact terms of the preference shares? If the iii article is correct then as long as they have reserves they are obliged to pay dividends. As Nat West had circa 10bn in equity and were profitable there should be very little risk to them not paying out.

[lord gnome] 15/4/2009 09:47

Solomon9 - you're welcome - I really need to thank the poster over on the Fool who did all the work.