Phoenix Share Discussion Threads

[jonwig] 03/6/2017 09:09

I tried very hard to avoid politicking in my last post. It seems I was waving an invitation. Please grandstand elsewhere!

[tournesol] 03/6/2017 08:51

Imho if Corbyn wins we'll see a very substantial reversal. His manifesto is a long list of explicit bribes designed to buy votes - single biggest item is free university education aimed at buying the student vote but there is a long long list of others. He wants to (re)nationalise rail,mail,water,energy and who knows what else. Costs of that are omitted from manifesto. Then wants to repeal employment laws and revert to unfettered trade unions - that's to thank Unite for their support. He will increase welfare state regardless of cost (e.g. pensions, other benefits). He wants to increase corporation tax from 18 to 27% He wants to introduce a tax on financial transactions which will drive those affected offshore. His approach to Brexit is incoherent and utterly supine. He will go into negotiations with "kick me" on his forehead and will emerge with empty hands. On a wider front his entire ministerial team will be third rate deadbeat apparatchiks and hangers on who are all struggling to hide their amazement at being picked. The answer is that all the smart/competent Labour people have dis-associated themselves from JC. We will suffer a cataclysmic economic collapse. It will set us back several generations.

[jonwig] 03/6/2017 08:10

Lauders - Corbyn: small probability of a big hit.

"Hard" Brexit: do as much research as you want, you'll still have no clue about the longer-term effect on the UK economy! Nor has anyone else. Forget immediate market reactions. You can over-analyse these things, you know!

[lauders] 03/6/2017 07:19

Thanks for the prompt reply jonwig. I appreciate nobody has a crystal ball. Wish there was such a thing around for investment decisions ;-) I guess what I am asking in a bad way is what investors think will happen if the vote goes one way or the other. The polls/opinions seem to think it is a close call. Not being in the UK it isn't easy to get a feel for the situation. So if May is victorious the general sentiment is that things will remain as they are and the market could rally further as a result while if Corbyn proves to be the victor the markets will take a cautious mode and shares such as PHNX are likely to react negatively. Is that about right or do I need to go and do more research? ;-)

[jonwig] 03/6/2017 06:52

Lauders - none of us has a crystal ball ... depends how you view the chances of Labour being the largest party on Friday. The market's assuming it's not going to happen.

[lauders] 03/6/2017 05:26

Finally decided to buy some PHNX shares but now have to decide on the timing. I am not buying these shares directly but have to go through an institution who will buy for me without being able to set any limit order and at their pace! All very unsatisfactory IMO but I don't really have a choice as pension/QROPS related. So will probably just have to place the order on Monday and see whether they manage to complete the deal before the election or after. General inquiry for those here on the timing. Better to just proceed and hope for the best price whatever or wait until after the election to proceed? I will be buying whichever way but would be interested in opinions if any are forthcoming! Thank you.

[joan of arc] 13/5/2017 12:05

Thanks guys

[hyden] 13/5/2017 12:00

XD was 30th March, pay day is on Monday. :-)

[garycook] 13/5/2017 11:58

PHNX went XD on 30/03,and the 23.9p divi will be paid this Monday 15th May.

[joan of arc] 13/5/2017 11:51

Can anyone say what the XD and payment dates for the divi are? The dates they have on their website are total rubbish.

[jonwig] 04/5/2017 18:22

Bond tender - £178m acceptance out of £300m offered. That sort of result suggests a fair price.

[jonwig] 25/4/2017 20:01

stun12 - your input much appreciated, thanks. I wish more investment professionals would contribute to these boards!

[stun12] 25/4/2017 16:04

fenners, I can't disagree with your maths at all. The issue of 4.125% bonds is a tap, i.e. it adds to existing bonds outstanding. The issue is a Tier 3 note...this is what the FT published about it when the issue priced in January:

"A UK insurer has today priced a first-of-its-kind bond in sterling, paving the way for a new market for regulatory capital in the UK insurance sector.

Phoenix Group has sold a £300m bond which matures in 2022 at a coupon of 4.125 per cent, reports Thomas Hale in London.

The bond is classed as “tier 3″ insurance debt, which is exposed to losses at times of stress but ranks higher than other capital bonds.

Insurers must have certain amounts of capital under Solvency II – European-wide regulation designed to fortify the industry. They can meet up to 15 per cent of their capital requirements through tier 3 bonds."

So yes, there is a cost, but the lower regulatory capital requirement is obviously a trade-off which Phoenix considered worthwhile.

Useful conversation, fenners, thanks for introducing it.

[fenners66] 25/4/2017 14:42

Stun thanks for your input.

2.4% yield on a 5.75 % coupon presumably on a yield to maturity basis is where you get the 113.3%.

However it reads as these will be replaced by
" issuance by the Company (the "New Issue") of Sterling Denominated 4.125 per cent."

So over the same 4 years that adds £16.5m interest to the rolled up yield above.

So I make that a differential of £20.4m over 4 years

Cost of New Issue as well? Another 1% or included in the tender costs?

So that looks like costing £23.4m+

Which is a lot better than my calc of £60m above

[yupawiese2010] 25/4/2017 13:43

Thanks Jonwig & stun12 for your input.

[stun12] 25/4/2017 13:33

These are my calculations (I work in an associated field).

Tender offer is at Gilts +190bps; the five year Gilt currently yields 0.5%, so the tender is at a yield of 2.4%. The coupon on the notes is 5.75% and the bonds are due on 7th July 2021. The price at the 2.4% yield is 113.3%. The cost of the tender will be small - usually less than 1%. Phoenix will be replacing the debt either with cheaper bonds or with more subordinate (quasi-equity) ones, and each year will have marked its issue to market, so the "loss", if any, will be small.

HTH.

[fenners66] 25/4/2017 12:12

Thanks -went back and looked again at the chart - noticed that they are trading at the 52 week high or thereabouts so cost will be about £24m more than 52 weeks ago!

My £60m estimate of cost would be enough to wipe out 2016 profit before finance cost of £52m so the impact is not insignificant.

[jonwig] 25/4/2017 11:55

fenners - these bonds aren't traded in the ordinary way: if you want to bid or offer, you put up an indication on your Bloomberg Terminal and hopefully you get a matched bargain. Minimum size is usually £100,000. The bond price is that of the last trade, which could be weeks or months ago (look at the nodes on the chart in the link).

The end result of this is a trade-off between yield and security. Also PHNX will know what price range it will accept. Participants don't reveal their hand as they do with sharedealing.

[fenners66] 25/4/2017 11:41

Thanks Jonwig.

I guess the bond price is a mid-price so the cost could be a little more....

Maybe assume including the 1.5% a price of 115 which means the exercise would cost £45m + transaction costs.

Say £60m ? Which is a lot less than £125m + but is still a lot of money - if the market accept it.

I got a bit grouchy over him implying that I could not understand the finances.

[robsy2] 25/4/2017 11:24

Thanks Jonwig for clarifying that. I see this as a positive.
R2

[jonwig] 25/4/2017 11:14

Bond price, 112.4:



What's the point of the exercise? Boonkoh (#2260) was correct in his last sentence. Tier 3 bonds are useless as regulatory capital, as they are not loss-absorbing. If a senior bond defaults, the bondholders can liquidate the business to recoup their principal plus future interest. The best capital is tier 1 common equity. Solvency II is stricter on capital reserves, and PHNX can't do takeovers without a sufficient capital buffer.

Incidentally, don't knock someone for not quite answering the question: next time he might not bother to post anything.

EDIT: the bonds are being tendered.

[fenners66] 25/4/2017 11:12

No they are NOT!

The numbers I asked for are fairly simple - What's the cost ?

Anyone got a quote for the debt.

I think it's NOT understanding the mechanics of the financing which leads one NOT to question the cost.

[rcturner2] 25/4/2017 11:03

If you don't trust the management of a company you should not be invested in it.

The mechanics of the financing here are beyond the understanding of any except a small core of professionals.

[fenners66] 25/4/2017 10:47

Boonkoh aside from - trying to sound like you think you know what you are talking about - since you didn't answer the cost question ; it seems to me you fall firmly in the camp of

"just have faith that everything is kosher."

I prefer to deal with facts and financial impact not sentiment

[fenners66] 25/4/2017 10:44

I have had a look for a market price for the bonds - so far found their ISIN : XS1081768738
but no current price.

Nearest similar I can find would be SSE 5.875% Sep 2022 with a quote 123.347 to 1.364

My concern here is that IF phoenix are quoted anything like then paying off 4 years early could have a cost of......


What 36 +1.5% say 37.5% which is £112.5m !!!

I'm speculating here but WHAT is the cost??