Lloyds Grp 9.25 Discussion Threads

[nicholasblake] 02/12/2021 11:07

Lloyds can return the pref capital at par, subject to a vote of ordinary shareholders (strictly speaking prefs vote at same meeting). The only protection is that the inevitable screams of outrage may not be something which they wish to face just now.

[pierre oreilly] 02/12/2021 10:53

So, what's the view, hold or accept?I'm now in two minds. I want the income but I don't want it to disappear a year down the line and just get a quid each.Lloyds will take the cheapest legal route. Can they get my shares back at par in the future legally?

[glavey] 25/11/2021 14:03

With inflation recently becoming a hot topic perhaps Lloyds are of the view that when the effects of that (and paying for covid) bite the share price will drift down. Thereby they do not want to be subsequently thought of as overpaying now in the eyes of other stakeholders. Of course there is nothing preventing them from issuing another offer later, other than the exercise must have some cost (they will be able to consider if the value 'return' of the current offer has made sense). Or it may just be that this exercise is to meet with the PRA's request to 'do something'. Who knows?

Given the relevant date, 31/12/21 (or 01/01/22 of you like) it seems like only Nat West and Lloyds will be making offers for prefs. following the PRA's letter, from which it could, perhaps, be garnered that other issuers more simply responded that they proposed to maintain the status quo.

[redartbmud] 23/11/2021 11:18

It seems like the great and the good are shunning the tender. The information is that things will continue unchanged for those remaining holders
Lloyds would appear to have backed themselves into a corner by offering such a paltry return for surrendering the Prefs.
I wonder if they may let things rest for a while and possibly come back with a better offer at some point in the future. The argument against is a potential rise in interest rates.

[glavey] 23/11/2021 08:52

"Institutional holders" - those said to hold £100k or more of principal value (etc.) so that will include HNW individuals who perhaps bought around the time of the GFC when the share prices were battered and still hold. I think there were a few, possibly quite a few.

Ball park 'take-up' results:
LLPE 6.475% redeemable - 6.9%
LLPC 9.25% irredeemable - 12.4%
LLPD 9.75% irredeemable - 12.9%

For comparison:
NWBD 'institutional' take up - 10.2%
NWBD 'retail' take up - 6.6%

[rahosi] 22/11/2021 15:52

Previously..299,987,729
Tendered.....37,319,867 12.44%

Outstanding 262,667,862

Quantity held by Institution unknown

[cwa1] 22/11/2021 14:04

Seems a fairly low take up on the face of it

[zangdook] 22/11/2021 13:44

37,319,867 out of how many held by institutions?

[p@] 22/11/2021 13:10

12.4% I,ll keep mine then.

[rahosi] 22/11/2021 12:31

ACCEPTANCE OF VALID TER INSTRUCTIONS RECEIVED PRIOR TO THE GENERAL EXPIRATION DEADLINE

The Offeror hereby announces that it accepts for purchase all Preference Shares validly tendered pursuant to the Offers prior to the General Expiration Deadline, as set out in the table below:

Aggregate Liquidation Purchase Price Aggregate Liquidation
Description of Preference Validly (including accrued and Preference
Preference Shares ISIN Tendered(1) unpaid dividends)(2) Outstanding(3)
------------------------ -------------
GBP198,065,600 6.475% GB00B3KSB568 GBP3,691,321 112.050% GBP52,780,890
Non-Cumulative
Preference Shares(4)
GBP300,000,000 9.25% GB00B3KS9W93 GBP37,319,867 167.250% GBP262,667,862
Non-Cumulative
Irredeemable Preference Shares
GBP100,000,000 9.75% GB00B3KSB238 GBP7,168,493 174.200% GBP48,572,393
Non-Cumulative
Irredeemable Preference Shares


In respect of the 9.25%s, I make it only a 12.44% acceptance

[nickieg] 21/11/2021 12:35

Correction ! I've just noted that RSAB are on the HL list but renamed Sun Alliance.

[zangdook] 21/11/2021 05:04

I wonder if they're allowed to buy in the market? If so, after trying a tender to mop up any nervous holdings that might not otherwise sell, they could place an ongoing order to buy up to a certain price and leave it running indefinitely. If they can be bothered. They'll never get rid of them altogether - I don't believe that's what they're thinking. They're not trying to wind up the business or make the books super tidy, but just to reduce costs.

After January they'll be an ongoing cost which produces no return of itself, but which has to be honoured - like pensions. Of course they're paid.

[pipera12] 20/11/2021 17:06

It could be that since these no longer count as capital from Jan that the directors just are satisfying the ordinary shareholders that they have at least tried to round up any sellers.The fact that they have offered near current market price is good.It seems to consolidate the view that for NWBD llpc and boi at least there will be no attempt to redeem at par,only redemptions at recent market price seem to be the normI will hold

[kenny] 20/11/2021 17:03

I don't think any financial institution will try redemption at par. Rather, they will play the long game to redeem as much as possible. I think this offer will likely be followed by many others, possibly at annual intervals.

Each subsequent offer will be made at about the ruling market price of the preference at that time. Also, every offer exploits the fact that institutions and individual investors now have such short investing timeframes: shorter than any time in the past.

Holders have to consider whether a subsequent offer will be better or worse - tricky if we are truly in a rising interest rate environment. After a number of years there may be a small rump left which will remain or be offered a better than market price offer.

Incidentally, I think this strategy may be adopted by all the financial institutions whose current preference shares do not meet the new Basel rules e.g. Santander, NatWest, Aviva, Standard Chartered etc. However, some of those and others, may not make any offer, if their total issued preference classes are so small as to not provide a meaningful barrier to meeting the new Basel rules comfortably.

Aviva, for example, may be considered a candidate to make redemption offers, not least because it previously tried to force redemption at par. However, since that attempt to force redemption, Aviva's balance sheet has changed materially, by way of selling a number of businesses and using part of that cash to repay other debt. Therefore, it may make no offer to redeem and, being human, the current CEO may feel that she does not wish to risk any criticism or face losing her job by making even a market price offer - if the problem that existed a few years ago no longer exists. That may prove a surprise to Aviva/General Accident preference holders, whose share price seems to anticipate offers of redemption.

Others, like Lloyds, may make offers only until such time as they reduce the remaining preference in issue to a level where they comfortably meet the new Basel rules.

I have seen lots of posts on various preference share bulletin boards to the effect that holders have the upper hand, or the redemption offers should be better, or will get better in future if there is a low acceptance on current offers. I think the situation should be assessed in a far more nuanced fashion.

It is clear that some holders think they hold all the aces but it seems to me the companies seeking to redeem have lots of options and are likely to continue playing a very long game - probably long enough to convince such holders that they do not hold all the aces.

[trollsniper] 20/11/2021 15:36

As a holder of these and many other prefs as part of my income strategy, I agree with all that has been said - it does seem a slightly mean offer if they were serious about reducing the number outstanding of preference shares. If they are projecting interest rates will peak (as many banks are) then the future interest stream for prefs would seem expensive, but surely their NPV analysis would justify a premium of 10% to be “rid” of as much as possible of the issue? So it strikes me this is a slightly optimistic tender hoping a few people will cave in. Is there still a risk an issuer will try to redeem at par? Technically yes, which is why yields on prefs are still good. But it didn’t do the last CEO who tried it much good…

[boystown] 20/11/2021 08:38

Well, finally received the email from HL last night giving us til noon on 8th Dec - so plenty time to see what the institutions do.

[glavey] 20/11/2021 01:50

"I may well keep a holding of 1 though, in each account, in the hope that it annoys them."

Nice idea, in principle :-)

If there's just a very small rump left it would encourage the cancellation at par as it would cause little ruption. But if it were rejected wholeheartedly by all...

One thorn is a minor irritation, one thousand a significant annoyance!

[glavey] 20/11/2021 01:38

Really any retail holder should wait until they can analyse and consider the results of the 'institutional' offer on Monday 22nd (and perhaps read any comment following). There is adequate time available, so best use it. If the amount tendered is small it suggests that the perceived risk of holding is limited, and vice-versa.*

To add some context the amount tendered in respect of the Nat West NWBD 9% offer, more generously priced at 175p, was just 17%. So 83% rejected it, preferring to keep the prefs. The Lloyds offer for the LLPC 9.25% is 165.75p, so a lower offer for an instrument paying a larger dividend. There is a difference in the terms which favour NWBD but that has only been recognised (pricewise) by the market in the past year or so. Look back and you will see NWBD trading lower than LLPC for quite a while after the GFC (and for that matter before it as the equivelent HBOS instrument). It doesn't take much working out to deduce that if Lloyds had priced their offer in line with Nat West it would be at 179.86p rather than 165.75p and the latter represents 92%, or an 8% discount. (Rounded figures, obviously.) The considered view is that the Lloyds offer is not 'good', it is at best reasonable but actually rather mean if the underlying intent is to get shot of these in a market friendly manner.



* When considering the results note that it is not clear how many are held by 'institutions' and how many by 'retail'. However LLPC 9.25% has been popular with retail because the issue size provided greater liquidity and at times a smaller spread. This resulted in the available yield on LLPD 9.75% often being a little lower (than LLPC) at market offer. LLPE 6.475% has not been so popular with retail because of the apparent lower dividend and because it carries a 2024 call, so almost certainly will be redeemed at par at that time.

[hindsight] 19/11/2021 18:05

Thanks Glavey for the excellent post. I stayed in because I believed numbers holding would on balance keep the black horse tame, if a lot accept that changes. I also believe these were due a fall albeit not massive. Overall I agree the price isnt great and the black horse has made a profit out of appearing that it could go wild, along with the ECNs profit. Its wrong and one can only hope it means they have to pay more for capital elsewhere than would otherwise but I somehow doubt it. I may well keep a holding of 1 though, in each account, in the hope that it annoys them.

[peterbill] 19/11/2021 17:26

I think I'll take up the offer ... don't have that many and all in ISA and it does seems like a good offer.


Lloyds Banking Group plc has announced that it intends to purchase all the £300,000,000 9.25% non-cumulative irredeemable preference shares in issue through a tender offer. This will give you the choice to sell, or tender, your shares to the company at a fixed price with no dealing charges.

Under the proposed terms of the offer, you will be given the choice to tender your shares at a price of 167.25% of the liquidation preference. For clarification purposes, this means you will be given the choice to tender your shares at GBP1.6725, which is equal to 167.25% of the liquidation preference. The purchase price includes an amount equal to accrued and unpaid dividends.

The next dividend payment date pursuant to the terms of the 9.25% preference shares is 30 November 2021 with the record date being 5 November 2021. If you are a holder on the record date, you will be entitled to the dividend payment. This payment will be made separately in addition to the purchase price.

[glavey] 19/11/2021 16:57

Don't forget, depending on the level of your holdings and purchase cost (if tendered and accepted) you may also be locking in a capital gain.

I'd not wish to try to convince you of anything, but you can have a look and see where these and similar instruments have trading. Here's a little trick for you: Go to and pop the instrument name or epic into the search box and choose the instrument. It'll take you to a summary page with a little chart on the right. Select 5Y. Now left click on the chart. You can now drag the chart left or right and see the price as you scroll back through the years. With the cursor over the chart, using the mouse wheel it is also possible to collapse or expand the chart x-axis. You can correlate the price with the interest rate at the time. Rates are here: (Scroll down the page.)

Of course interest rates may not be the only thing which influences the price.

[redartbmud] 19/11/2021 09:39

Glavey

Excellent post. System will not allow a tick up!!!!


red

[redartbmud] 18/11/2021 18:49

Update from Hargeaves.
They are preparing the documentation. Once online, it will be available for action until 8 December.