Lloyds Grp 9.25 Discussion Threads

[supernumerary] 28/1/2009 14:17

fbrj - thanks - much appreciated

[fbrj] 28/1/2009 13:46

supernumerary - the dividend on the 9.25% and 9.75% prefs are both payable on 31 May and 30 Nov. For the 6.475% prefs the div is payable on 15 March and 15 Sept. See pages 21 and 22 of this document:

[supernumerary] 28/1/2009 13:11

Does anyone know what the record and payment dates are for these various issues, or where I might find that information?

[future financier] 28/1/2009 12:14

PS just wish I could afford to top up at these crazy prices!

[future financier] 28/1/2009 12:13

p@ and OBR - you are correct - if there is ANY divi to ords (cash or scrip) - then there MUST be FULL payment of pref divis (either in cash or scrip).

[sommet2] 28/1/2009 12:03

gwlduncan,
Are you sure about that.The reason why RBS have swapped their £5b of pref shares for ord is because the prefs did not qualify as capital.

I hold a whole range of pref shares and most are non cum.Great rise today. I do not hold this issue but hold the LLPE and LLPD.The easiest way to value the prefs relative to each other is to calculate the running yields.LLPC were undervalued relative to the others but are now a tad expensive.The LLPD are better value at present.Also for some reason the LLPC are more favoured by private investors who recently panicked and sold them down to below fair value.

[gwlduncan] 28/1/2009 11:51

I think dividends on most bank preference shares are non cumulative - presumably allows them to be classified as Tier 1 capital.

[p@] 28/1/2009 11:34

Pt according to the information on LLPE 'Quote' it is Non cumulative.

[eithin] 28/1/2009 11:19

Illiquid the reason I think. But certainly looks good for the longer term.

[ptolemy] 28/1/2009 11:06

Odd that LLPE isn't moving with LLPC given yield is lower and it comes with accumulated divi.

[eithin] 28/1/2009 08:55

Looking a good punt on the back of the LLOY rise today.....

[p@] 27/1/2009 17:09

Post -66
Super-nice find,as far as I know before they can give anything to the ord shares the prefs have to be paid in full.

[supernumerary] 27/1/2009 16:59

obr - this is the best I can do:

Your thinking was exactly mine, but with the additional point that the letter seems to indicate that we should get something in 2009.

[eithin] 27/1/2009 16:39

OBR: Right... My plastic brain must be playing up....

[old boy returns] 27/1/2009 16:31

eithin - I think you will find it is 0.375p per share. 37.5p would be marvellous but sadly tis not the case.

[old boy returns] 27/1/2009 16:29

supernumeracy - do you have a link to that communication? I have not received it (I also hold the ords worst luck !). Interesting situation because I think that before paying any dividend on the ords (even if it was in the form of shares created by capitalising reserves) they would first have to pay the dividend to the preference share holders.

[eithin] 27/1/2009 16:24

Have 8,000 9.75% prefs ex HBOS. Just noticed £30 been credited to my account, i think in compo for reduced benefits with Lloyds. Think that gives 37.5p per share.

[supernumerary] 27/1/2009 16:20

On 21 Jan, Victor Blank wrote to shareholders:

'However, the restriction on payment of dividends does not preclude the declaration of a capitalisation issue paid out of non-distributable reserves. We intend to issue shares by way of a Capitalisation Issue for the 2008 financial year at a level to be determined by the Lloyds Banking Group Board at the appropriate time.'

Can somebody explain in simple terms what this means, and what, if any, is the impact on their obligations towards pref holders?

[sommet2] 27/1/2009 16:08

Old Boy Returns
I agree with you on all counts but as always timing is key.Personally I will wait untill the Lloyds financials have been examined before buying more.

As I stated previously I do not believe the prefs will pay out in 2009.I should have added that I include the new govt prefs in this belief.LLoyds will not make a net profit in 2009 and it would not make sense to pay the govt £480m in interest because it would reduce capital.I know Lloyds have said they would like to repay the £4b prefs during 2009 but I do not believe this will happen unless they can replace it with an equivalent amount of loan stock.Obviously they are not going to accept the kind offer from Treasury and swap the pref for ord shares.

It has occured to me that if the govt prefs with a nominal rate of 12% were subject to market forces they would be trading at about 60p.Lloyds could then make an open offer to buy up all the prefs at say 75p which would save them £1b.

[p@] 27/1/2009 15:47

OBR -I take your view ,also this quantitive easing (printing money)I understand one way they are planning to do it is to buy up corporate debt (get the interest rate down).

[old boy returns] 27/1/2009 15:19

I am becoming very tempted to average down on these having bought a few at 80p not that long ago. I know that we are in uncharted territory at present but I cannot help but feel that the risk reward with a c. 20% yield compared to 1.5% and falling bank base rate is very favourable.

The key points for me are:

- Lloyds / HBOS is now the biggest retail bank in the UK. It cannot be allowed to fail.
- If it does need further support then I do not see nationalisation as a politically acceptable solution because there are huge pension investments in the company and nationalisation would make the pain currently being felt by the pension holders permanent. Also Lloyds, who were seen as a safe, low risk business model bank, saved the Government's bacon by taking on HBOS so again it would be a dangerous call politically for the Government to turn round and stuff Lloyds at this juncture.
- Possibly no dividend will be paid in 2009 but the return on cash is bog all right now so the opportunity cost of holding is low.
- Great scope for capital appreciation if / when the uncertainty looming over banks lifts in a positive way.
- Can't help but feel that the outcome of all these toxic debt derivatives the banks have on their balance sheets will be better than the market is pricing them at (ie virtually zero). After all the underlying assets are houses etc. and they must have some value even in this meltdown.

What do others think?

[p@] 27/1/2009 15:16

Fair view sommet,but I was to believe that all prefs were equal,so you are saying that Joe public are not going to get their first divi on their prefs.
Not a vote winner.

[sommet2] 27/1/2009 12:49

Although I hold ( and losing big time)I do not expect the prefs to pay any interest in 2009.That is clearly the view of the market as well.The simple reason is that payment of the interest is at the option of the board and they will not pay unless the money comes out of profits.LLOY are not expected to make net profits in 2009.

The position with loan stock is very different because non payment would trigger a default and result in a credit derating and well as activating CDS's ( we don't want to get into the affects of this) I am not sure how much outstanding loan stock the new group has but it runs into many many billions.I can't see a situation arising when the loan stock will not pay out

As somebody pointed out previously if the prefs were cumulative they would be great value but I don't think they would have fallen so much. I would like to buy more but I am going to wait untill the hysteria surrounding the banks calms down.

[renew] 27/1/2009 12:20

They spent 2m on holiday bonuses at christmas would be hard to justify not paying 6m divi on the next pref payout.

[davidosh] 27/1/2009 12:00

Very true p@ LOL