Nat.west 9%pf Discussion Threads

[makinbuks] 18/6/2021 16:48

Thanks, I guess that makes sense although it means the regulators apply more rigorous rules where they are least needed, but where perhaps there would be the biggest public stink if things went wrong!

[nisbet] 18/6/2021 16:39

The market-makers are required to report trades in line with the status of the security. The determinants include liquidity, daily volumes, EMS etc. They will apply rules diligently and their compliance department will ensure that.

[makinbuks] 18/6/2021 16:26

Are the mm's not obliged to report in a timely fashion. Indeed are they even in control of the timestamp?

[nisbet] 18/6/2021 11:59

For those who still have an interest here, again late into the evening (post 7pm) there were approximately 45 transactions reported; the larger transactions at 176.5p and above were clearly the buys with the remainder, mostly 4-figure bargains, retail sells.

The market-maker facilitating this business remains determined to report at a time when the audience will be non-existent and one would have to conclude that this must be at the request of whoever is doing the buying.

With the absence of any RNS I believe we can now discount the possibility that Nat West is doing the buying. And finally, it’s worth reminding investors that the aggregate of all retail sells in the market is equal to a number that will not be accepting the tender terms.

[nisbet] 17/6/2021 08:14

Another 900,000 shares reported after 7pm yesterday evening. Around 40 sales mostly transacted just above 175p and 4 six-figure purchases dealt at a price just above 176p. There was one bargain for 25,000 reported at 173.5 during normal hours.It looks to me that all the post 7pm reported bargains are being facilitated by one market-maker as it would be too much of a coincidence for simultaneous reports to be going through from multiple sources.

[nisbet] 16/6/2021 16:25

It's a discussion I was having with a friend of mine. To buy equity that forms the permanent capital of the company requires shareholder approval and although they would certainly have approval for ordinary share capital, I'm not sure whether this extends to Preference capital.In addition, you might ask whether buying back tiny amounts in the market achieves anything beyond buttressing the market when stock comes on offer. Clearly, institutions have given their reply and Nat West must now decide whether they want to play the game properly.It's worth keeping an eye on both 10-year and 30-year Gilt yield,but especially the latter, which as I compose this note is a very depressed 1.26%. Also, just look at the yields elsewhere in the Preference market; the stable of AvivaPreference issues are comparable in yield terms with the Nat West 9%.Sorry Mr CEO, you will just have to pay up!

[dbadvn] 16/6/2021 15:55

nisbet,
spot on.
Why do they not just start buying it up in the market?

[nisbet] 16/6/2021 15:05

This is a disastrous result for the company, but given the yield structure right across the curve, highly predictable.If they sounded out a handful of institutional holders and took note of the replies, they could have made offers for both the Preference issue and the subordinated loan that reflected the necessary premium for success.As I suggested in a previous post, they were trying to pull a fast one and hoping for the best. They failed spectacularly as far as the institutional offer is concerned but they might get a greater proportion of the retail holding. However, retail will account for a much lesser proportion of the issue, (20% versus 80%) is usually the split in this type of security.

[chr1sjs] 16/6/2021 14:50

"The Issuer estimates the impact of the Acceptance will be a charge to income in its results for the second quarter of 2021 of approximately £12.5 million", here's how it's calculated:-

a) 9.00 per cent. Non-cumulative Preference Shares Series A .... £14,327,240 tendered at a cost of 75% above par (£1.00) = £10,745,430 above par


b) 11.50 per cent Undated Subordinated Notes Callable on or after 17 December 2052 .... £2,013,000 tendered at a cost of 85% above par (£1.00) = £1,711,050 above par

Therefore total cost, above par, £12,456,480, rounded to "approximately £12.5million" as per rns.

For Nat West they will have removed par £14,327,240 + £2,013,000 = total £16,340,240 from what is current Tier 1 capital for £12.5m. From an accounts perspective I can see why they have done it. I think they would have hoped for a much higher acceptance take up.

Will be interesting to see if and when they come back with a higher offer for the outstanding. I'm personally retaining my holding like the majority of insti's.

[makinbuks] 16/6/2021 13:41

10% strikes me as low, maybe supporting the expectation of a higher offer?

Does this from the RNS, sum up the conundrum:

"The Issuer estimates the impact of the Acceptance will be a charge to income in its results for the second quarter of 2021 of approximately £12.5 million. After taking into account the estimated effect of taxation and based on risk weighted assets of £164.7 billion as reported for 31 March 2021, this would equate to a reduction in the Offeror's CET1 capital ratio of approximately 1 bp."

From the offeror's perspective that seems a high price for £14m of redemptions

[caradog] 16/6/2021 13:20

10% of preference shares tendered by institutions. 125 million outstanding. See RNS.

[nisbet] 16/6/2021 07:55

From the tender offer document:-In respect of any Securities accepted for purchase, the Issuer will also pay an amount equal to any accrued and unpaid interest (in the case of the Subordinated Notes) or accrued and unpaid dividends (in the case of the Preference Shares) on the relevant Securities from, and including, the interest payment date or dividend payment date for the Securities immediately preceding the relevant Settlement Date up to, but excluding, the relevant Settlement Date. The Settlement Date for Institutional Holders is expected to be 17 June 2021 and the Settlement Date for Retail Holders is expected to be 29 June 2021.

[zangdook] 16/6/2021 04:19

As far as I can see the prospectus only mentions dividends accruing in respect of Dollar Preference Shares. The relevant part for the Sterling prefs is probably sub-paragraph ii here:


Capital
(a) On a return of capital on a winding up or otherwise (but not on a redemption or purchase by the Bank of shares of any class) the Sterling Preference Shares shall rank after the Original Preference Shares, pari passu inter se and with the Dollar Preference Shares and any other shares that are expressed to rank pari passu therewith as regards participation in assets, and otherwise in priority to any other share capital of the Bank. On such a return of capital on a winding up or otherwise, each Sterling Preference Share shall, out of the assets of the Bank available for distribution amongst the members, carry the right to repayment of the amount paid up or credited as paid up on such Sterling Preference Share together with any premium paid on issue, and also together with:—
(i) the amount of any dividend thereon, whether or not declared or earned, which is due for payment on or after the date of commencement of the winding up or other return of capital but which is payable in respect of a period ending on or before such date; and
(ii) in respect of any period in respect of which a dividend thereon is payable that begins before, but ends after, the date of the commencement of the winding up or other return of capital, the proportion, whether or not declared or earned, of the dividend that would otherwise have been payable thereon in respect of such period that is attributable to the part of the period that ends on such date.

I don't know if a tender offer like this counts as a "winding up or other return of capital", but I imagine they'll want to do the right thing and pay.

[nisbet] 15/6/2021 19:10

Another bunch of trades totalling 550,000 reported well after the close, approx 7pm. There are a couple of 6-figure bargains which look like the mopping up of around 25 smaller sell transactions.Why the market-makers are not reporting them until 7pm is odd. It looks like they don't want anyone to see them, and most investors won't; by tomorrow morning they will have disappeared.

[nisbet] 15/6/2021 17:36

No, accrued calculations are made with reference to the company's pay date. The xd date has nothing to do with the company, it's purely for administrative purposes and applied by the London Stock Exchange.

[greyingsurfer] 15/6/2021 17:22

Does it not accrue from the ex date? Which was early March, the 5th, I think

[nisbet] 15/6/2021 16:55

The last dividend was paid in the middle of April. The dividend accrues on a daily basis, so there is now 2 months of accrued owed to shareholders.

For those who tender their stock today, settlement will take place on Thursday and accrued calculations will incorporate every day between the last payment, which I believe was 16th April up to and including tomorrow.

[nbudd] 15/6/2021 16:12

The Tender document states that they will pay any "accrued and unpaid dividends" for the preference shares. But surely they have always paid on time so there shouldn't be any. Or am I missing something?

[greyingsurfer] 15/6/2021 14:57

Thanks nisbet. I'd forgotten these traded dirty. My mistake. Has anyone had any tender docs from their broker yet?

[nicholasblake] 15/6/2021 14:32

@nisbet, I agree arbitrageurs are the best bet!

[dbadvn] 15/6/2021 14:05

Not sure of the regulatory requirement but given the relatively small amount £200m or so I am surprised that NW has not just bought them in the market.

[nicholasblake] 15/6/2021 13:58

Nisbet, arbitrageurs are my best bet, too!

[nisbet] 15/6/2021 13:31

Definitely not market makers. This is almost certainly institutional buying on the basis that Nat West will have to pay an appropriate premium to eliminate this security from the balance sheet in any meaningful way.

Tomorrow’s announcement will be revealing in this respect.

[nicholasblake] 15/6/2021 11:44

Buy at 177p including brokerage and sell at 175p and pocket 1.5p dividend. 🤔
Market makers don’t pay stamp, so maybe them?

[nisbet] 15/6/2021 11:31

Just to be clear, “dirty” means that accrued interest is not calculated separately from the share price. That’s why when “dirty”, quasi fixed income go xd, the share price falls by approximately the value of the half-yearly dividend.