# Hybrid Securities



## Warren Greenspan (16 April 2009)

Howdy all
I've become interested in interest rate securities esp some of the hybrids.
I've been accumulating BEPPA (plenty of helpful info here on ASF, thanks BB) and am interested in GNSPA.

BUT

I can't find anything. (and am sick of visiting across the road)

Are there any threads on hybrids in general or GNSPA in particular that I've missed?
I need discussion both for and against from people more knowledgeable than me. (That would be most of you!)

In particular I'm wondering where to view the original prospectus. The Gunns site seems to have deleted it.

Also keen to find out if it's a "perpetual" or not.

Others of interest to me are AAZPB  TTXPA  RHCPA

Thanks, wazza.


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## Warren Greenspan (16 April 2009)

*Re: Hybrid Securities GNSPA*

I probably should have added to the above post, or its heading, about the juicy returns on offer with GNSPA at $54. Are they too good to be true?

approx 15% pa return and If they convert then that figure goes to over 40%

(I'm "paraphrasing" figures and assumptions from a HC poster here)

I don't hold but I'm sure thinkin about it!!!!!!!!!!!


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## freddy2 (16 April 2009)

*Re: Hybrid Securities GNSPA*



Warren Greenspan said:


> In particular I'm wondering where to view the original prospectus. The Gunns site seems to have deleted it.




Look at previous announcements at ASX (http://www.asx.com.au/asx/statistics/announcements.do) for Gunns (GNS). I believe I found the prospectus under an announcement 12/09/2005 "Replacement FORESTS Prospectus "


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## Warren Greenspan (16 April 2009)

*Re: Hybrid Securities GNSPA*

Thanks Freddy,
Much appreciated.

Are you a holder of these?


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## Julia (16 April 2009)

*Re: Hybrid Securities GNSPA*

Warren, is there any particular reason you're attracted to these, rather than an ordinary share?

They're currently trading at around half their original face value so I'm sure you know that there's a possibility (likelihood?) of further capital loss.   The underlying GNS shares aren't exactly setting the world on fire and are pretty sensitive to political factors.

Plenty of shares also offering similar yield.

Not being anti the hybrids, no strong feelings for or against.


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## Warren Greenspan (17 April 2009)

*Re: Hybrid Securities GNSPA*

Hello Julia
After being glued to the Briscon thread I feel I kinda know you (in an internet forum, non creepy kind of way) Loved your posts and the compassion shown for the unlucky holders. Would love to see a royal commission.

In answer to your question "why i"m interested in hybrids" I'll try and articulate a few points. I'm still very much in the learning and investigating stage.

*I like the fact that for some (non perpetual?) hybrids they must be redeemed at face value in either cash or scrip at some prescribed future date. If the comp survives etc etc. For GNSPA = $54 and FACE VAL = $100 that's a nice cap. gain even if the price drops in the interim.

*GNSPA in particular is now paying BBSW + 5% so that's 15 or 16%pa at sp of $54.
 As I watch many of my other holdings reducing or suspending divs it seems attractive and a more certain payment.


*Any money I invest will be modest and come from that part of my portfolio that is set aside for gambling, sorry, speculating. (From the same part which I bought AFG, gambling, sorry speculating, that they would rise like a phoenix....)

*I'm only really interested in hybrids that are not perpetual ie have some guarantee of redemption so that their current discount to face value can be later realised as cap gain. (that's why I've stopped looking at AAZPB)

some other points

-I,ve recently picked up 40 000 BEPPA at about 8c, definitely a gamble. There is a great thread on them here at ASF.

-I'm a HUGE fan of ASF and its stopping me getting the pavers finished...BUT..there doesn't seem to be as much discussion here on hybrids as over at HC (which I'm not a huge fan of) so I was hoping my first post might prompt someone who could contribute answers as opposed to my questions and maybe an ongoing thread on hybrids.

-2 weeks ago I didn't know what a "hybrid security" was.

-Ethically, I still don't know how I feel about investing in Gunns after some of the things they've done in Tassie....'spose it's better than woodchip from S E Asia


Thanks for your interest Julia,
sorry about the lengthy response
Cats to beat Adelaide this Sat!!!!!!


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## freddy2 (17 April 2009)

*Re: Hybrid Securities GNSPA*



Warren Greenspan said:


> Thanks Freddy,
> Much appreciated.
> 
> Are you a holder of these?




No, just wanted to find out about some other similar securities (eg SEVPC) and had trouble finding the prospectuses until I worked out the best way was to look under the issuing company announcements at the ASX.


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## drsmith (17 April 2009)

*Re: Hybrid Securities GNSPA*

The Financial Review povides a complete listing of interest rate securities daily. There's plenty to choose from depending on one's risk tolerance.


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## Warren Greenspan (17 April 2009)

*Re: Hybrid Securities GNSPA*

Thanks Doctor Smith

 The AFR tables are interesting and I think the last column "YTM Conv" is telling me whether or not a particular hyb sec is perpetual or not.
I'm assuming n/a in this column means theres no compulsory redemption ie its perpetual. This is one of the main pieces of info I've been seeking.

Learning is good. Knowledge is power. Back to the jupiter 2 for some more research.

Regards to young Will and that bubble headed booby 

Warren


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## hardyakka (17 April 2009)

*Re: Hybrid Securities GNSPA*



freddy2 said:


> No, just wanted to find out about some other similar securities (eg SEVPC) and had trouble finding the prospectuses until I worked out the best way was to look under the issuing company announcements at the ASX.




Here's a pretty useful listing of hybrids that is updated daily. It links to explanations and have a look at the footnotes, it gives explanations of the yields.

http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc

I was having a look at a number of hybrids only a few days ago and IMO GNSPA is a good buy. The only reason I did not acquire a small holding of about 500 was because I decided instead to increase my holding in BEPPA, cant have my cake and eat it.

Cheers


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## Warren Greenspan (17 April 2009)

*Re: Hybrid Securities GNSPA*

Thanks HY
I was off to bed but now must check it out.

I know what you mean about BEPPA. 
The 2 threads on BEPPA and BRISCON have had me riveted for days and I'll soon be in the divorce courts!!!!

Are you going to keep loading up on Beppa or do you a see a small correction soon (before any ann. on DBCT)?


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## Julia (17 April 2009)

*Re: Hybrid Securities GNSPA*



Warren Greenspan said:


> *I like the fact that for some (non perpetual?) hybrids they must be redeemed at face value in either cash or scrip at some prescribed future date. If the comp survives etc etc. For GNSPA = $54 and FACE VAL = $100 that's a nice cap. gain even if the price drops in the interim.
> 
> *I'm only really interested in hybrids that are not perpetual ie have some guarantee of redemption so that their current discount to face value can be later realised as cap gain. (that's why I've stopped looking at AAZPB)



Warren, I haven't used any hybrid securities so may have a faulty understanding of how they work, and I've only had a quick look at the prospectus but gather from this that GNSPA are perpetual.

Re your sentence above 

"If the comp (?) survives.   For GNSPA =$54 and Face Value = $100 that's a nice cap gain even if the price drops in the interim, "

can you explain how you anticipate this will happen?


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## nathanblack (17 April 2009)

*Re: Hybrid Securities GNSPA*

i'd like to find some more beppa style hybrids too. ie hybrids with an agreed maturity date and value. in beppa's case $1 in 2012.

its then up to individual company analysis to determine if we believe the company will be in existence at maturity date. if so we are guaranteed the face value regardless of what they are currently trading at.


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## nathanblack (17 April 2009)

*Re: Hybrid Securities GNSPA*



Julia said:


> Warren, I haven't used any hybrid securities so may have a faulty understanding of how they work, and I've only had a quick look at the prospectus but gather from this that GNSPA are perpetual.
> 
> Re your sentence above
> 
> ...




in the case of BEPPA, the issuing company agrees to pay interest quarterly on the FACE VALUE($1) and agrees to buy back the share at FACE VALUE on maturity. The fact the share is trading below FACE VALUE at this point in time in inconsequential. In BEPPA case its trading substantially below face value because of real/percieved risks that the company will not survive due to debt and therefor cannot buyback share at agreed face value. they have already suspended interest payments, althought they are accumulating the interest to pay in future. And BEPPA is a preferance share above ordinary share in ranking.

SO IF GNSPS operates the same it is trading at $54 presently but may have an agreed value of $100 at maturity. When is maturity and is it an agreed face value is the answers we want


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## Julia (18 April 2009)

*Re: Hybrid Securities GNSPA*

Thank you, Nathan.


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## Warren Greenspan (18 April 2009)

*Re: Hybrid Securities GNSPA*

Nathan,
There is a great thread here on ASF on BEPPA.
There's loads of researched based info largely thanks to poster Banks Bystrica.


Julia, Nathan's answer sums it up nicely.

HOWEVER
In the case of GNSPA I now realise they are perpetual so in theory there may never be any cap gain although everyone (other posters) seem to think they'll be redeemed at face value eventually.
This makes them riskier but the return of approx 15%pa with sp of about $54 has its attractions
warren


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## nathanblack (18 April 2009)

*Re: Hybrid Securities GNSPA*

Thanks Warren. Love the BBI thread. BB has really put in the hard yards. i really hope it pays off for him and anyone that has taken the plunge into BEPPA.

Sorry for the newbie question, but what is perpetual in this context? im thinking that it never matures and therefor is never bought back?  only the term of interest are renewed periodically and obviously at some point they will be bought out but at any time and at market value?
 even if this is the case it makes sense that the stock will trend towards face value if the company fundumentals and global economy improve. just means theres no real timeline. could be next year or 5years.

please if you find any beppa structured stock, post here or PM me. im very interested.

thanks


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## Bill M (18 April 2009)

*Re: Hybrid Securities GNSPA*



nathanblack said:


> Sorry for the newbie question, but what is perpetual in this context? im thinking that it never matures and therefor is never bought back?  only the term of interest are renewed periodically and obviously at some point they will be bought out but at any time and at market value?
> even if this is the case it makes sense that the stock will trend towards face value if the company fundumentals and global economy improve. just means theres no real timeline. could be next year or 5years.




Hello Nathan and others, I am a investor of hybrids and floating rate notes. Perpetual indeed does mean the issuing company may never buy it back. I hold one called SUNHB, this was issued in 1999 and it is still on market. In those days spreads were minor, in this case only .75% above the bank bill rate. Because of such a low spread I doubt Suncorp will ever buy them back. In my case I hope Suncorp will be taken over and the buying company is forced to redeem those notes at face value. My opinion is to stay away from perpetual securities, I only have one like that. It's current face value is $53 so if you paid $100 per security then you have lost 47% of your capital, it is a disaster for those who want their money back.

The thing to remember is how can can it go back to $100 if there is so much more out there offering more interest? It can't and wont as long as you can buy stuff like Tabcorp Bonds with a sure maturity and a spread of 4.25% above the bank bill rate. This doesn't mean that such stocks are complete basket cases, you can still make good interest income from them at current prices because you can buy twice as many. In SUNHB's case it is 3.75% x 2 = 7.5% income and you still have the remote chance of getting face value back.

If I have to make a choice right now of buying SUNHB at 7.5% income compared to Tabcorp Bonds at 7.5% income I would choice the Tabcorp Bonds for sure. The reason being it will convert to cash for sure in 5 years and if interest rates go up so will your income. Of course SUNHB has that remote chance of being bought back but there lies the risks. Both scenarios assumes neither company goes broke, hope that helps.


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## Calliope (18 April 2009)

*Re: Hybrid Securities GNSPA*

Hybrid securities offer a much better return than term deposits and are often fully franked. On a risk level they rate lower than equities.  As with shares, with careful selection the risk can be lowered substantially. In Macquarie's suggested hybrid portfolio they are all rated. (see link) 

http://www.macquarie.com.au/newsletter/attachments/fsg/090417_Convertibles.pdf

Those unrated hybrids (and by definition, riskier) often offer better returns opportunities. Many of them went into freefall along with their underlying stocks during the downturn. 

Two of the securities Warren mentioned (Hastings TAPS and Ramsays CARES) are in my portfolio. Each has attractive features.


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## Julia (18 April 2009)

*Re: Hybrid Securities GNSPA*



Julia said:


> Warren, I haven't used any hybrid securities so may have a faulty understanding of how they work, and I've only had a quick look at the prospectus but gather from this that GNSPA are perpetual.
> 
> Re your sentence above
> 
> ...






Bill M said:


> Hello Nathan and others, I am a investor of hybrids and floating rate notes. Perpetual indeed does mean the issuing company may never buy it back. I hold one called SUNHB, this was issued in 1999 and it is still on market. In those days spreads were minor, in this case only .75% above the bank bill rate. Because of such a low spread I doubt Suncorp will ever buy them back. In my case I hope Suncorp will be taken over and the buying company is forced to redeem those notes at face value. My opinion is to stay away from perpetual securities, I only have one like that. It's current face value is $53 so if you paid $100 per security then you have lost 47% of your capital, it is a disaster for those who want their money back.
> 
> The thing to remember is how can can it go back to $100 if there is so much more out there offering more interest? It can't and wont as long as you can buy stuff like Tabcorp Bonds with a sure maturity and a spread of 4.25% above the bank bill rate. This doesn't mean that such stocks are complete basket cases, you can still make good interest income from them at current prices because you can buy twice as many. In SUNHB's case it is 3.75% x 2 = 7.5% income and you still have the remote chance of getting face value back.
> 
> If I have to make a choice right now of buying SUNHB at 7.5% income compared to Tabcorp Bonds at 7.5% income I would choice the Tabcorp Bonds for sure. The reason being it will convert to cash for sure in 5 years and if interest rates go up so will your income. Of course SUNHB has that remote chance of being bought back but there lies the risks. Both scenarios assumes neither company goes broke, hope that helps.



Thanks, Bill.   Helpful reply.
So, Warren, is it clear now why I was questioning your assumption of the built in capital gain on GNSPA?


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## banska bystrica (18 April 2009)

*Re: Hybrid Securities GNSPA*

Good thread. Debt holders are always in a stronger position than equity holders.
That's why BEPPA are incredible value when compared to the BBI price. BEPPA have been smashed down in tandem with the BBI price due to the perception that BBI is on a path to liquidation. BEPPA at less than 10c in the dollar is a speculative investment. If BBI survives to 2012, BEPPA are redeemed at $1.04 in either cash, BBI shares or a combination of both.
BEPPA is also fairly illiquid and two large instos have been exiting BEPPA and BBI at the same time. This has created a dislocated market. It really isn't an efficient market because there is forced selling and a lack of buyers. The price was driven down mercilessly. Look at the chart. 30c to 10c in November in basically two days for BEPPA.
My view is that BBI will survive and therefore buying BEPPA at 10c in the dollar with a return of $1.04 in three years time is too good an opportunity to pass up.
I also hold BBI.

BBI has NAV of $1 per BBI. This INCLUDES the $780M debt to BEPPA. Therefore, BEPPA in effect has a $2.4Bn cushion.


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## nathanblack (18 April 2009)

*Re: Hybrid Securities GNSPA*

BB have you found any other BEPPA styled hybrids? i know you havent done as much research as to there longterm future and if asset values are realistic but im looking at more hybrids that have a buyback at set value in future years which may be substancially above current price. i can then do my own research into the companies viability.

cheers


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## Warren Greenspan (18 April 2009)

*Re: Hybrid Securities GNSPA*

Nathan, I just asked that exact question of BB on the BBI thread

Julia, yes your question on the potential cap gain with GNSPA is understandable. IN fact now that I know they are perpetual my interest has waned as cap loss is probably just as likely but I'mstill keen on finding others. (maybe this thread needs renaming but I don't know how eg delete the ref to GNSPA)
On certain other forums there are people who are convinced that GNSPA will be redeemed but personally that may be too much of a risks for me.

warren greenspan (must change that to bernanke)


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## Calliope (18 April 2009)

*Re: Hybrid Securities GNSPA*



nathanblack said:


> im looking at more hybrids that have a buyback at set value in future years which may be substancially above current price. i can then do my own research into the companies viability.




TAPS (TTXPA) current price $82.50 resets on 30 June 2010



> Each TAPS is a cumulative, reset, preferred security in the TAPS Trust which has an issue price or face value of $100 and a maturity date of 30 June 2015
> unless redeemed or exchanged.
> TAPS can be redeemed at a TAPS holder’s request at any reset date (the first reset date being 30 June 2010) at the Responsible Entity’s discretion, with
> the Responsible Entity to elect whether the redemption is to be satisfied by way of cash or a number of HDF stapled securities or a combination of both.
> ...


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## Bill M (19 April 2009)

*Re: Hybrid Securities GNSPA*

The hybrids are only as good as the company issuing them. The reason BEPPA is 90% off it's face value is that everybody thinks BB will go under, it's as simple as that. You might be higher up in food chain but if there is nothing left to give back to the note holders then you will get nothing back. I am currently holding an investment that has had the liquidators brought in and it seems I will only get back 50% of my money. Despite what's written in prospectuses and the promises some companies make when they go under you go under. In this case I just look at BB as high risk in every way and I simply wouldn't risk $1 with them but that is just my opinion and I could be wrong.

Lets talk about step up dates too. A lot of hybrids have step up dates/conversion date and buy back dates. Sometimes when these dates come up they can take the step up option. Again if you wanted your money back be careful it might not happen. Classic example is STOPB issued by Santos. STOPB is due for conversion/step up or buy back in September 2009. The current coupon is only 1.55% above the 6 Month Month bank bill rate. Now I have no idea of what Santos is going to do. The current price is $92 so you have a chance to make an 8% capital gain plus get the final interest payment. Looking at that it looks like a sure thing but hang on they might decide to step up the interest a further 2.25% and lock you in for another 5 years, again you won't get your money back and you must wait. 

When looking at any hybrids, convertible notes or floating rate notes always look for the following:

1. Who is the issuing company, what is their rating, can they go under?

2. Be sure of a maturity date. Is it perpetual?

3. What happens at maturity? Do they convert to ordinary shares, can they step up and would you be happy with that.

4. What is the worst outcome that can happen to YOU. Plan for the worst outcome then you won't be so disappointed when it comes. When I bought SUNHB I thought to myself what is the worst outcome, in this case it was that it is perpetual, it paid cumulative interest income and that it will always pay .75% above the bank bill rate and now that is where I am. 

There is risk with everything, you just have to plan for it, good luck.


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## Julia (19 April 2009)

*Re: Hybrid Securities GNSPA*



Bill M said:


> The hybrids are only as good as the company issuing them. The reason BEPPA is 90% off it's face value is that everybody thinks BB will go under, it's as simple as that. You might be higher up in food chain but if there is nothing left to give back to the note holders then you will get nothing back. I am currently holding an investment that has had the liquidators brought in and it seems I will only get back 50% of my money. Despite what's written in prospectuses and the promises some companies make when they go under you go under. In this case I just look at BB as high risk in every way and I simply wouldn't risk $1 with them but that is just my opinion and I could be wrong.



I share your opinion on BBI, Bill.   Hugely risky.



> Lets talk about step up dates too. A lot of hybrids have step up dates/conversion date and buy back dates. Sometimes when these dates come up they can take the step up option. Again if you wanted your money back be careful it might not happen. Classic example is STOPB issued by Santos. STOPB is due for conversion/step up or buy back in September 2009. The current coupon is only 1.55% above the 6 Month Month bank bill rate. Now I have no idea of what Santos is going to do. The current price is $92 so you have a chance to make an 8% capital gain plus get the final interest payment. Looking at that it looks like a sure thing but hang on they might decide to step up the interest a further 2.25% and lock you in for another 5 years, again you won't get your money back and you must wait.
> 
> When looking at any hybrids, convertible notes or floating rate notes always look for the following:
> 
> ...




A really helpful post, Bill.   Thanks.


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## nathanblack (19 April 2009)

*Re: Hybrid Securities GNSPA*

BBI have to hybrid securitys at prestent SPARCS(NZ) and BEPPA(AUS). BBI have already offered rollover terms to SPARCS and also and early redemption.

Reading the fine print BBI has the option to pay $1 cash or $1script on maturity. Also they may buyback early or rollover. Certain events require holders approval whilst others can be forced on us.

I like your post Bill and it explains some pitfalls worth considering. They are certainly a more complex investment than ordinary shares and need full investigation.

They really are designed as income based product and not capital gain. and if bought for a steady income most offer a good deal(above term deposit rates) and if you chose a A+ rating or similar its low risk.

in BBI/BEPPA case dividends are suspended. so not exactly a income play atm. but there is a chance of capital gain also. im looking to add another dividend play to limit my exposure to inflation and BEPPA.

THANKS AGAIN Bill for explaining some pitfalls, which are from real experience(the best way to learn).


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## banska bystrica (19 April 2009)

*Re: Hybrid Securities GNSPA*



Julia said:


> I share your opinion on BBI, Bill.   Hugely risky.




Julia,
I suggest you buy CBA, WBC, NAB if you have no appetite for risk and don't understand BEPPA.


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## banska bystrica (19 April 2009)

*Re: Hybrid Securities GNSPA*

Julia,
You have admitted you hadn't even heard of BEPPA until very recently yet you can now say they are too risky. I just cannot see how you could have put in enough time to thoroughly research BBI/BEPPA to come to such a quick conclusion. I am interested in your reasons.


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## Julia (19 April 2009)

*Re: Hybrid Securities GNSPA*



banska bystrica said:


> Julia,
> I suggest you buy CBA, WBC, NAB if you have no appetite for risk and don't understand BEPPA.



Thank you for your advice.



banska bystrica said:


> Julia,
> You have admitted you hadn't even heard of BEPPA until very recently yet you can now say they are too risky. I just cannot see how you could have put in enough time to thoroughly research BBI/BEPPA to come to such a quick conclusion. I am interested in your reasons.



I have held BBI shares in the past.  Sold them when I sold everything else in January 2008 and am very glad I did.  I don't hold on to falling stocks.

If you read Bill's post below, I am agreeing with him that "the hybrids are only as good as the company issuing them".
Given the woeful state of BBI, that's a good enough reason not to buy them imo.  Plus of course the suspended dividends/distributions.

There are plenty of much more stable companies in the market, not overwhelmed with debt.




Bill M said:


> The hybrids are only as good as the company issuing them. The reason BEPPA is 90% off it's face value is that everybody thinks BB will go under, it's as simple as that. You might be higher up in food chain but if there is nothing left to give back to the note holders then you will get nothing back.




But good luck to anyone who has bought these.  I hope it all turns around for you.


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## banska bystrica (19 April 2009)

*Re: Hybrid Securities GNSPA*



Julia said:


> Given the woeful state of BBI, that's a good enough reason not to buy them imo.




That's a strange reason. BBI has plenty of debt but the balance sheet doesn't look to be in a "woeful state". Like the guy on CNBC says every night, _"Life is full of risks my friend. If you don't want to take risks, you shouldn't be living"_. I understand most people's tolerance for risk is low. I take this opportunity to thank each and everyone of those people who sold out of BBI at under 4c and BEPPA under 6c. I will be forever grateful.


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## Warren Greenspan (19 April 2009)

*Re: Hybrid Securities GNSPA*



> When looking at any hybrids, convertible notes or floating rate notes always look for the following:
> 
> 1. Who is the issuing company, what is their rating, can they go under?
> 
> ...







Thanks Bill. Good points and just the sort of info I was looking for when I started this thread. I'm quickly learning.

Can you tell me (apart from reading the prospectus) if there is any site or publication or newsletter that covers that sort of info for interest rate securities. There's so many million words written in review of almost any share but so little on these int. rate  sec's.   Thanks Bill

Julia
I'm not trying to turn this into a BEPPA thread and I do appreciate your concerns about risk but I wonder who would show the most loss or gain in the following scenario.
*Buying the top 20 bluechips in say Nov 2007 
or
*buying BEPPA at 7.9c and BBI going belly up and all assets liquidated


Yes I know the scanario is "stacked" but interesting nonetheless.

regards W

PS You are a genius for getting of the market when you did. Well done


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## nathanblack (19 April 2009)

*Re: Hybrid Securities GNSPA*



Warren Greenspan said:


> I wonder who would show the most loss or gain in the following scenario.
> *Buying the top 20 bluechips in say Nov 2007
> or
> *buying BEPPA at 7.9c and BBI going belly up and all assets liquidated




Even BB has said in the BBI thread that if BBI is liquidated we may see nothing(despite the NTA). Most blue chips have lost about 50%(coming back up a bit now). so i would say the bluechips win out.

Anyway its not really about bluechip V BEPPA/Hybrids. A portfolio has room for both, infact if you dont hold atleast one major bank id be worried. its all about diversity.

my portfolio was ultra defensive, but im branching out now with smaller outlays on riskier/high reward stocks. im young and have time.

agree lets not turn this into another BEPPA thread. Hopefully others can share more experiences with other interest rate securities they held/hold and any pitfalls.


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## Julia (19 April 2009)

*Re: Hybrid Securities GNSPA*



Warren Greenspan said:


> Julia
> I'm not trying to turn this into a BEPPA thread and I do appreciate your concerns about risk but I wonder who would show the most loss or gain in the following scenario.
> *Buying the top 20 bluechips in say Nov 2007
> or
> *buying BEPPA at 7.9c and BBI going belly up and all assets liquidated



Wouldn't it depend on your investment time frame for buying the bluechips?

I don't want to be critical or unreasonable, but frankly it's not a very useful comparison.   I have simply said that I find BBI as the issuing company too much of a risk to buy any instrument associated with it. Neither would I buy the ordinary shares in the hope of a return to my previous sell price of about $1.55.    My choice, OK?

I don't propose to continue responding to requests to justify that choice.

If I could make a suggestion, Warren:   Spend about $30 and buy "Secrets of Profiting in Bull and Bear Markets" by Stan Weinstein.   Mr Weinstein offers clear and uncomplicated directions for understanding trends and reading charts.   

If you read this you will see that no one was a genius for getting out of the market at beginning of 2008.  The market peaked in November 2007 and by January the downtrend was clear, reinforced by nothing but bad news financially from most of the world.


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## banska bystrica (19 April 2009)

*Re: Hybrid Securities GNSPA*



Julia said:


> I have simply said that I find BBI as the issuing company too much of a risk to buy any instrument associated with it.




You have made that decision based on "guesswork" and no-one said BBI is going back to $1.55. I'd be more than happy for BBI to get back to just 30c. That would price my BEPPA's at 40c+. Not a bad return from 8c hey?
I find it strange that you would state  _"I find BBI as the issuing company too much of a risk to buy any instrument associated with it"_ when you have little or no knowledge of the underlying fundamentals of BBI. Just because you sold them at $1.55 last year doesn't mean you have any idea of their situation now.


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## Warren Greenspan (19 April 2009)

*Re: Hybrid Securities GNSPA*

Julia
No I realise it's not a "useful comparison".
It was really offered as a bit of a tongue in cheek alternative view and as I said I had stacked the scenario by choosing NOV 2007

Thanks for the tip re the Stan Weinstein book.  I'm always open to new knowledge and ideas.

regards warren


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## Calliope (20 April 2009)

*Re: Hybrid Securities GNSPA*

See today's issue of thebull.com.au for a review of the Hybrids.


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## Bill M (20 April 2009)

*Re: Hybrid Securities GNSPA*



Warren Greenspan said:


> Can you tell me (apart from reading the prospectus) if there is any site or publication or newsletter that covers that sort of info for interest rate securities. There's so many million words written in review of almost any share but so little on these int. rate  sec's.   Thanks Bill




I used a publication called "The Intelligent Investor". They provided a run down on several interest rate securities last year. In short they did the homework for us. I looked at what they had to say then I searched for the prospectuses online and once I read the relevant ones I then made a decision. *NOTE* I am not suggesting for a minute that "The Intelligent Investor" is a good publication, just merely saying that they do cover hybrid securities.

Calliope that's a good site you suggested, here is the full link and has some great suggestions.

http://thebull.com.au/articles_detail.php?id=2114

Also take another look at hardyakka's post number 10. That site has done the numbers on the hybrids, you can easily see the companies ratings, interest income and other statistics, cheers.


----------



## Warren Greenspan (21 April 2009)

*Re: Hybrid Securities GNSPA*

Thanks Calliope and Thanks (again) Bill.

I'm away from home for a few days but will follow up the links soon.

My mum and dad are in their 80's and have some of their $ sitting in term deposits etc which are suddenly down to3 or 3.5%. They depend on this interest to live so some of these higher rated, lower risk bonds on offer from the banks and AMP etc that are offering 7 or 8% bear investigation. The Bull article was a good read in this regard.

Keep it comin' boys and girls

Regards Warren


----------



## jbl1971 (28 April 2009)

*Re: Hybrid Securities GNSPA*

Just joined up and hybrids are something I have become particularly interested in. The biggest trick is to read the original prospectus and be clear as the terms. Things to look for:

- are interest / divs cumulative or can they be suspended?
- you are a lender to the company ranking only above equity holders (how safe is it?)
- Most hybrids are potentially perpetual, they have a step up (i.e. the interest margin increases) at a point in time that was meant to be punitive and make the issuer redeem them but with interest margins having spiked the step up usually only brings the hybrid margin up to market. In saying that I think many will be redeeemed over time.

If they are trading at a substantial discount then they are worth considering,
eg Dexus DXRPA and Fairfax FXJPB. Even if they weren't redeemed if rates were to go up (and they will at some stage) then the value of these securities will increase because of the high coupon to be paid. I went through a heap of these and have tracked those listed below. I own DXRPA / FXJPB / SEVPC / FCLPA (much higher corporate risk) / RHCPA.


Company	Code	Rates	Face Value	Reset	Step Up	Maturity Terms	Payment Terms	Interest Cycle
Dexus (DXS)	DXRPA	90BBR +1.3%	$100	Jul-12	2%	Shares or Cash	Non Cumulative	Quarterly
Fairfax (FXJ)	FXJPB	180BBR +1.55%	$100	Apr-11	2.25%	Shares or Cash	Non Cumulative	Six Monthly
Futuris (FCL)	FCLPA	90BBR + 2.2%	$100	Jun-11	2.50%	Shares or Cash	Non Cumulative	Quarterly
Ramsay (RHC)	RHCPA	180BBR + 2.85%	$100	Oct-10	2%	Shares or Cash	Non Cumulative	Six Monthly
Santos (STO)	STOPB	180BBR + 1.55%	$100	Sep-09	2.25%	Shares or Cash	\	Six Monthly
Seven (SEV)	SEVPC	180BBR + 2.55%	$100	May-10	2.25%	Shares or Cash	Non Cumulative	Six Monthly
Sydney Airport	SAKHA	90BBR + 1.8%	$100	Dec-12	2%	Cash	Cumulative	Quarterly
Hasting (HDF)	TTXPA	90BBR + 2.0%	$100	Jun-10	NA	Shares or Cash	Cumulative	Quarterly


I also own BEPPA but is very much a punt.


----------



## Warren Greenspan (2 May 2009)

*Re: Hybrid Securities GNSPA*

jbl,
Good post and good info.
I'm about the same as you ie researching learning, esp cumulative, perpetual, step up/maturity etc.
I also hold BEPPA as a gamble.
At the moment  i'm a bit 'time poor' but I've been looking at a couple of your choices; SAKHA DEXUS and RHCPA for the last fortnight or so. SAKHA will probably be my first move.
I was looking at SEVPC but have gone off it.
I'm also probably going to have 'speculator' on GNSPA........thoughts on that one? There's a good thread on it over at HC

One question that really interests me is *Where's all the info*??? 
I've got the afr tables, macquarie codi tables, article in the bull.com and have trawled through some good articles in intelligentinvestor.com and of couse the asx site for prospectuses.....BUT do you know of any site or newsletter dedicated to interest rate securities??
I'd love to find one for some 'expert' opinion/background etc.

Good luck jb, I'll keep you posted on what I end up with.


----------



## awg (2 May 2009)

*Re: Hybrid Securities GNSPA*

another question

is there an easy way to find out if the dividends are franked?

info not obvious on ASX, dividend announcement or initial notes, commsec, in the case of DXRPA, AQNHA, BEPPA, anyway.

The only other place I can think would be the full initial PDS, not always easy to locate.


----------



## Calliope (3 May 2009)

*Re: Hybrid Securities GNSPA*



awg said:


> another question
> 
> is there an easy way to find out if the dividends are franked?
> 
> ...




Go to;
http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc

Look for (F) in the first column.


----------



## jbl1971 (9 May 2009)

*Re: Hybrid Securities GNSPA*

Warren and others,
Sorry about the slow reply (time poor / kids etc).
I have read the Intelligent Investor stuff and other articles that bob up on hybrids but haven't found any regular newsletters that deal specifically with this area. To be honest I think if you are serious you need to read the original prospectus as there are subtle differences in the terms of all hybrids. I'll have a look at GNSPA and let you know what I think.


----------



## awg (13 May 2009)

*Re: Hybrid Securities GNSPA*

I have been having a look at some Hybrids, and agree that it is neccesary to closely study the conditions that apply to each one, as they are different.

Its very hard to find the original PDS in the Company announcements, as the issue goes back years in some cases.

Is there any way to find the PDS more easily?

or to find out such things as reset conditions?

I did find the attached summary

http://www.fixedincome.com.au/docs/pdf/Hybrid Summary and Pricing.pdf


----------



## Bill M (15 May 2009)

*Re: Hybrid Securities GNSPA*

Hi everyone, just an example to bring up on interest-bearing securities. I wrote earlier about STOPB (Santos Fuels), now Santos has said they will buy back all FUELS at face value of $100 per share. This will happen in Sept 2009.

If you bought STOPB last week for $92 and then were lucky enough to receive this good news this week then you know for sure you got 8% capital growth the plus the divi on the way.

Unfortunately I was not set.............. 

You can win very easily on these if the luck is your way, cheers.


----------



## Calliope (15 May 2009)

*Re: Hybrid Securities GNSPA*



Bill M said:


> You can win very easily on these if the luck is your way, cheers.




My favourite is IANG reset exchangeable securities issued by the insurance company IAG. Their first exchange date is 15 March 2010, when it is expected they will be redeemed. They are presently trading at $68.


----------



## Bill M (16 May 2009)

*Re: Hybrid Securities GNSPA*



Calliope said:


> My favourite is IANG reset exchangeable securities issued by the insurance company IAG. Their first exchange date is 15 March 2010, when it is expected they will be redeemed. They are presently trading at $68.




I had a good look at these Calliope. They can be exchanged for preference shares at anytime. If that happens then a step up interest rate of 1% will apply. Then the rate is only 2.2% above the bank bill swap rate. During these current times the spreads are between 4 and 5%. What this is telling me is that it is quite likely they may not get redeemed because even after after the step up, the borrowing of your money for around 5.4% is pretty cheap for a company like IAG. They could in the future also exchange all the preference shares for ordinary IAG shares. So the reason the price is so low is that they might not get bought back or they might get converted into IAG shares. Of course you could get lucky and IAG might just redeem them all at face value but it seems unlikely, I could be totally wrong though. 

The worst case for this stock is that it won't get bought back and your current running yield is around 6.4% which will go up to 7.4% if it steps up that 1%, good luck.


----------



## nathanblack (16 May 2009)

*Re: Hybrid Securities GNSPA*

hi Bill. if u chose to convert them to preference share, would you get $100 dollars worth or the current value(approx $68)?


----------



## Bill M (16 May 2009)

*Re: Hybrid Securities GNSPA*

I suppose you would Nathan, not sure but if you did then you get $100 worth of prefs for $68 outlay but they wouldn't buy them back if they did that, you would have to wait, pick up the 7.4% on outlay I guess.

By the way I read an article in the Eureka Report that said that IANG was highly likely to get redeemed. It then went on to say the main risk was that if IAG experienced a significant rise in claims then it will be forced to convert the resets into preference shares and they won't be redeemed, that is the gamble we are faced with.


----------



## Bill M (16 May 2009)

*Re: Hybrid Securities GNSPA*

By the way guys I think this site has a lot of info on Fixed Interest Securities, don't know if it was mentioned earlier, cheers.

http://www.fixedincome.com.au/


----------



## Calliope (16 May 2009)

*Re: Hybrid Securities GNSPA*



Bill M said:


> By the way I read an article in the Eureka Report that said that IANG was highly likely to get redeemed. It then went on to say the main risk was that if IAG experienced a significant rise in claims then it will be forced to convert the resets into preference shares and they won't be redeemed, that is the gamble we are faced with.




FixedIncome said more or less the same thing in their Hybrid update yesterday.


----------



## nathanblack (16 May 2009)

*Re: Hybrid Securities GNSPA*



Bill M said:


> I suppose you would Nathan, not sure but if you did then you get $100 worth of prefs for $68 outlay but they wouldn't buy them back if they did that, you would have to wait, pick up the 7.4% on outlay I guess.
> 
> By the way I read an article in the Eureka Report that said that IANG was highly likely to get redeemed. It then went on to say the main risk was that if IAG experienced a significant rise in claims then it will be forced to convert the resets into preference shares and they won't be redeemed, that is the gamble we are faced with.




i was thinking more along the lines of:
1. convert $68 worth of hybrids into $100 worth of preference shares
2. sell preference shares on market.

thanks for the new link, will look at it now


----------



## jbl1971 (19 May 2009)

*Re: IANG*

Had a look at these. You *don't* get $100 worth of preference shares for one IANG. You get 1 preference share face value $100 for 1 IANG that has face value $100. Refer Disclosure Document in asx announcement dated 29/11/2004.

_If IAG exercises its Exchange Right, each RES (which is an IANG) will be Exchanged for one Preference Share. That Preference Share will have an issue price equal to the Redemption Amount on the Realisation Date._ This made me nervous as I would hate to get stuck with preference shares.

I have looked at these and feel I need to understand better as to how likely they are to convert to preference shares or simply redeem. One advantage of redeeming is that they already have the cash as IANGs are secured by a liquid cash portfolio.


----------



## cheeyeen (28 May 2009)

*Re: IANG*

I had a read at IANG's prospectus as well and find it really confusing.  I might got it wrong, my understanding is that IAG can convert IANG to IAG's preference shares anytime, and the initial margin for the new IAG preference shares will be the same as IANG's interest margin at the time of conversion.  IANG doesn't have a step-up date, but the new IAG preference share step up date is ten years from the conversion date.  So if IAG decides to convert it in the next few months before the reset date, then the initial margin will be 1.2% for ten years? (In the prospectus it said the margin for preference shares is "same as RES margin at preference share issue date").  If this is the case, I don't see why IAG will redeem IANG in this environment.  I don't have full access to any analyst's report about IANG, especially at fixedincome for the explanation in term of why they think IAG is highly likely to redeem it?  I guess the interesting bit is why didn't IAG convert IANG a few months back but rather do a placement/SPP to raise money?


----------



## NAsX (3 June 2009)

*Re: Hybrid Securities GNSPA*

Have started looking into these as well, just a question, who do you guys trade these with? and is traded on margin or full capital?

Cheers


----------



## jbl1971 (4 June 2009)

*Re: Hybrid Securities GNSPA*

NAsX, these are just listed securities with their own ASX codes and can be cought and sold like any other share.


----------



## jbl1971 (4 June 2009)

*MXUPA and fixedincome.com.au*

Bill M - thx for highlighting fixedincome.com.au - I have signed up (it is free) and find their research helpful. (Check out their research on MXUPA and IANG).

Very interested in MXUPA which are Multiplex Sites. Multiplex was taken over by Brookfield Asset Management a listed Canadian property and funds manager who are very strong financially. MXUPA is the only listed entity they have (pain in the neck for them?)

I listened to the conference calls they recently held for investors.

The bottom line is that they are trading between $37.00 to $39.00 for $100 face value and April 2010 step up to bills + 3.9% which will give them a yield circa 20% with 3:1 leverage for any rate rises.

Intelligent Investor dismissed MXUPA because they were concerned that because distributions were non cumulative and the responsible entity was no longer listed that there was nothing compelling directors to make distributions (i.e. the normal stick is you can't pay dividends and this situation no longer existed) *but* imo this is not the case and they have made all distributions since take over and were very reassuring in their comments to investors. Interesting punt with a really nice yield if you park your money with prospect of as serious capital gain if they are redeemed as credit markets continue to free up.

It was a coincidence but Brookfield also had some press today in the Prime Space section of The Australian and they were very bullish about acquiring assets etc.

Am interested in other's thoughts.


----------



## k039 (21 June 2009)

*Re: Hybrid Securities GNSPA*

I am heavily into hybrid securities and maintain a spreadsheet of their details, prices and returns. Hybrid dividend rates are usually tied to 90 day Bank Bill, 180 day BB or 5 year swap rates.
I was getting these rates from an excellent table on a NAB web page but NAB have changed their web site and this page seems to be no longer available. NAB are not replying to my emails on the subject.
Does anyone know where I can obtain this information on the Internet?


----------



## mav777 (1 July 2009)

*Re: Hybrid Securities GNSPA*

My portfolio is primarily made up of preferred paper.  I've been looking for info / tables / data / stock codes / anything for similar securities such as conv notes, floating rate notes, hybrids and the like for overseas exchanges. 
My sum total thus far is a blank page for tradeable securities. 
Not sure what they are called and where they are listed. 
I've found a few, however they are just prospectus's on securities that aren't listed.
Anyone have any links, tips or help that would like to give?


----------



## Calliope (2 July 2009)

*Re: Hybrid Securities GNSPA*

The Hastings Diversified Fund (HDF)  $250M equity raising has given TAPS (TTXPA) a good boost today. $110M is to be set aside for the redemption of these securities.

Warren, why don't you drop "GNSPA" off the title of this thread? It is a little confusing.


----------



## Warren Greenspan (4 July 2009)

*Re: Hybrid Securities GNSPA*

Calliope, I wanted to drop GNSPA from the title and I suggested it back near the start of the thread.
Trouble is I don't know how!!!!
Warren


----------



## Julia (4 July 2009)

*Re: Hybrid Securities GNSPA*

You can't do this.  PM a moderator or Joe and ask for this to be done.


----------



## Warren Greenspan (8 July 2009)

*Re: Hybrid Securities GNSPA*

Thanks Julia'
Have just sent PM to joe
Warren


----------



## cheeyeen (27 July 2009)

A few of the hybrids that were mentioned here are having a run recently.
The price and volume of IANG has been very interesting in the last few days.
It is almost like someone knows that it will get redeem in 2010.


----------



## shiftyphil (27 July 2009)

Pretty big gains in MXUPA and IANG so far today, both set to reset/step up or redeem early 2010.


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## Calliope (27 July 2009)

shiftyphil said:


> Pretty big gains in MXUPA and IANG so far today, both set to reset/step up or redeem early 2010.




I have IANG.  I bought SEVPC and TTXPA for the same reason some time back.  They have done well. There may be more mileage in SEVPC at $92.70. TTXPA has slowed down on $97.


----------



## sdmartin10 (27 July 2009)

Looks the Hybrids are getting a bit of rerating, maybe debt isn't so dirty anymore. PXUPA is up about 80% from the recent lows. Plus big runs on my other two hybrids MXUPA and ELDPA. They are making my portfolio look a lot healthier without even considering the big yields.

Still plenty of upside in some of these.


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## jbl1971 (29 July 2009)

The run up in hybrids has been great and my comments are as follows:

SEVPC - have started to lower my exposure just in case Stokes makes a bid for CMJ which may mean no redemption.

MXUPA has moved up to a much fairer pricing level. There is a chance at redemption and if not the yield is great. I say fairer pricing as it shouldn't have traded at a discount to hybrids like AAZPB - there is even a good argument that potential redmption means their should be a premium.

IANG is an interesting one - I would hate to get stuck with the preference share if they didn't redeem and the price would drop significantly so I am keeping my eyes peeled for clues.

DXRPA have taken part profits at $79 - $80 as potential conversion is a while off.

RHCPA will let position sit - close to cashing out as it approaches $100.

TTXPA waiting for redemption

PXUPA and FCLPA can't bring myself to invest in anything to do with such terrible businesses. 

AAZPB and GNSPA might be good yield plays at the right price and be redeemed when there is better and cheaper liquidity in the debt markets.


----------



## sdmartin10 (29 July 2009)

jb ppx may have some significant revenue squeeze for the next twelve months, but you'd be struggling to find a company with lower gearing. Considering you are buying debt that is pretty significant.

ELDPA is a risky play.


----------



## Calliope (29 July 2009)

jbl1971 said:


> The run up in hybrids has been great and my comments are as follows:
> 
> SEVPC - have started to lower my exposure just in case Stokes makes a bid for CMJ which may mean no redemption.
> 
> ...




I agree with your comments jbl. You have obviously done your homework. As it turns out AAZPB is not only a good yield play, but it got a remarkable jump in the market this morning.


----------



## jbl1971 (29 July 2009)

SD,

accept your comments re PXUPA. I nearly bought it (and should have based on the price movement) but I couldn't get past what a terrible business Paperlinx is. If they get to a point where they can resume payments on the hybrids it has a long way to run.

FCLPA (ELDPA) have completely done their dash with me given their continual revisions and poor management of working capital - it is in my never ever basket.


----------



## jbl1971 (29 July 2009)

Calliope said:


> I agree with your comments jbl. You have obviously done your homework. As it turns out AAZPB is not only a good yield play, but it got a remarkable jump in the market this morning.




Calliope with regard to AAZPB I was hoping I could sneak some a bit lower than the extent of the jump today. To be frank these are a good buy up to $75.00 i.m.o. (4.8% base yield and much higher chance of redemption at some stage).

I don't know about anyone else but I am now finding it harder to find equities to buy that I consider great value (the last 6 months have been a smorgasboard) and so am lokking at places to park cash.


----------



## jbl1971 (29 July 2009)

Interestingly Intelligent Investor has just put a buy for yield on AAZPB up to $75.00 (I promise I don't read it before my post!).

The numbers are good:
- quite secure risk profile post capital raise and with a key shareholder related to the Singapore Govt.
- Margin of 4.8%
- Quarterly distributions
- at a $70.00 purchase price the distribution is 11.37%p.a. If rates go up your margin will increase.

With the capital raise I bench it as being on par with DXRPA (better yield but arguably higher risk).

MXUPA now definitely should trade at a discount to AAZPB - I would buy MXUPA up to $55.00.


----------



## cheeyeen (29 July 2009)

Very interesting.. I have similar hybrids portfolios as yours.



jbl1971 said:


> MXUPA has moved up to a much fairer pricing level. There is a chance at redemption and if not the yield is great. I say fairer pricing as it shouldn't have traded at a discount to hybrids like AAZPB - there is even a good argument that potential redmption means their should be a premium.



Not very comfortable with this one because it is a preference share over a unlisted entity. (Unfortunately I got it when Multiplex was listed and I hold it all the way)



jbl1971 said:


> IANG is an interesting one - I would hate to get stuck with the preference share if they didn't redeem and the price would drop significantly so I am keeping my eyes peeled for clues.




I sold this one yesterday. I am very confused about the conditions in the prospectus.  If it is allowed to go to the reset date then it is all fine and worth it.  My main worry is about the part where it can be converted to IAG Preference Shares at any time.  If it is convert to IAG preference shares, then the margin is maintain at 1.20% and the step up date is ten years from the conversion date (did I read it correctly??).  With that terms, IAG would be a bit weird not to convert it to Preference Shares given there is no way they can get that margin in current credit environment.  Unless they don't need the money (but then why do they do a capital raising a few months back??).  But consider the proceed of IANG is currently invested with bills and bonds, that mean they don't really need it?  I got it 2 months back thinking that even it gets converted the price won't be that much worse than that level.  At current price I am happy to just take profit due to all the confusions..



jbl1971 said:


> RHCPA will let position sit - close to cashing out as it approaches $100.




Same position.  Though I don't mind holding if they step up the margin to 4.85%.



jbl1971 said:


> PXUPA and FCLPA can't bring myself to invest in anything to do with such terrible businesses.




Same here, not touching these two.



jbl1971 said:


> AAZPB and GNSPA might be good yield plays at the right price and be redeemed when there is better and cheaper liquidity in the debt markets.




I bought into AAZPB last week after I read that ALZ still declare distributions for the half year, and Singapore investment arms hold 60% of the company and probably won't let it bankrupt.  Good timing I guess.  I also has ORIPB, thinking of taking profit.  

Recently bought into NABHA thinking of holding long term.  I sort of thinking about building up an "income stream" from listed investment..  Also when the interest rate starts to move higher, may be the price get a bit closer to 80 marks because higher yield.


----------



## cheeyeen (29 July 2009)

I start to get interested in this theory..

Hybrid Portfolio Theory
http://venturepopulist.com/2009/06/hybrid-portfolio-theory/


----------



## sdmartin10 (31 July 2009)

Glad I have those risky ELDPA's today. I think the chnage is reflective of the risk that has now been taken off the table. Major debt pay down and good spp.

Still some risks, that's why it's still running at 12% yield at 50/100 face value. But ELD is no longer on death watch.


----------



## cheeyeen (31 July 2009)

sdmartin10 said:


> Glad I have those risky ELDPA's today. I think the chnage is reflective of the risk that has now been taken off the table. Major debt pay down and good spp.
> 
> Still some risks, that's why it's still running at 12% yield at 50/100 face value. But ELD is no longer on death watch.




Yah.. A lot of the companies have worked hard to strengthen their balance sheet now.  The market is also willing to take on a bit more risk.  Interesting that gap between MBLHB (rated BBB+) and NABHA (rated AA-) has now shrinking fast.


----------



## jbl1971 (4 August 2009)

SD, Jackman at Elders has done a great deal for them in terms of survival and hybrid holders can thank him for that - good luck to you. QBE's subscribing for shares reflects their view (and they are capable people) that Elder's distribution network is more valuable than the market gives them credit for.

The recent performance of hybrids across the board reflects the increasing appetite for risk in the market. They are a good place to have your money at the moment - collect a good yield and wait for redemption when rates allow.

IANG worries me because unlike other instruments there is no punitive step up to encourage redemption - they can convert to a 10 year preference share at a 1.2% margin (well below current rates). I have compared them to IAGPA which currently pays 5.63% per annum and trades circa $100. If IANG converts to a preference share then it should trade circa $70 to $75 with upside if rates go up.


----------



## cheeyeen (4 August 2009)

jbl1971 said:


> IANG worries me because unlike other instruments there is no punitive step up to encourage redemption - they can convert to a 10 year preference share at a 1.2% margin (well below current rates). I have compared them to IAGPA which currently pays 5.63% per annum and trades circa $100. If IANG converts to a preference share then it should trade circa $70 to $75 with upside if rates go up.




IAGPA is paying a fixed and fully franked dividend (so gross up to 8%).  IAGPA is rated "A" so if converted IANG will probably rated the same.  Compare to WCTPA, maturing/stepping up in 7 years, which is rated "A" as well the price is about 85-86 range at the moment.  And PCAPA, rated "A+" and trading at 170-172 range.  Since it will be a long time before it is converted or step up, I tried to look at NABHA which is rated "AA-", currently trading at 75 level.   So it looks like it can go between 70-85 range.  I guess the wildcard is for any reason, IAG decides to redeem it.  But looks like it will probably be toward high seventy to mid 80 range.


----------



## sdmartin10 (4 August 2009)

ELDPA continued to surge yesterday, I find $59 a bit surprising. Maybe I need to take some responsibility I sold half of mine at $55 .

Given the risk compared to others and still 2 years to step up. It is now trading above MXUPA and not that far below rated Hybrids.


----------



## Calliope (5 August 2009)

On the other I bought GMPPA yesterday morning only to see it drop $6. They (and GMG) are in a trading halt today. I think good news may come out of it.


----------



## Bill M (5 August 2009)

jbl1971 said:


> SEVPC - have started to lower my exposure just in case Stokes makes a bid for CMJ which may mean no redemption.




I own some of these. My thoughts are that redemption is the best outcome and still a strong possibility. However if that does not happen then the interest rate steps up to *about* 4.5% above the 6 Month bank bill rate. That would give me about a 7.7% gross coupon rate. I paid around $90 a share for these so in fact my return will be higher. So in either case I am very happy to hold these, cheers.


----------



## Bill M (5 August 2009)

Calliope said:


> On the other I bought GMPPA yesterday morning only to see it drop $6. They (and GMG) are in a trading halt today. I think good news may come out of it.




------------------------

Goodman Group requested a trading halt this morning before revealing details of its planed $1.7 billion capital raising.

It is understood the well-anticipated deal will comprise a $1.2 billion equity raising through Macquarie Capital, and a $500 million preference share issue to the Chinese Investment Corporation through Morgan Stanley.

Full Story Here


----------



## Calliope (10 August 2009)

GMPPA certainly rebounded this morning.


----------



## Bill M (10 August 2009)

Calliope said:


> On the other I bought GMPPA yesterday morning only to see it drop $6. They (and GMG) are in a trading halt today. I think good news may come out of it.






Calliope said:


> GMPPA certainly rebounded this morning.





Calliope, good call mate, well done! I am a holder of these but I bought for much higher prices and before the market crash.

This debt restructuring that they are going to do is going to save the company I reckon. I read somewhere that when it's all finalised GMG will be at gearing level of only 27%. I also read that no further refinancing is due for GMG until 2012. I can't provide a link as evidence but from memory that is what I read somewhere. (Please check that before taking it as 100% correct). At the end of the day you bought GMPPA at a 45% discount which will give you a running yield of about 9% with a possible 45% capital gain to come. For me I am very happy that now our interest payments *look* safe and the company should survive. Lets not forget how GMPPA collapsed to $11 when things were not looking so rosy.

Anyhow good luck with them and well done.


----------



## Calliope (3 September 2009)

Elders - ELDPA

From FIIG Securities research; 



> Elders is one corporate issuer that is yet to file its accounts for 2009. Nonetheless what information it has delivered can only be described as a major positive for the company’s hybrid investors.
> 
> As mentioned above, the company announced yesterday that it had sold its ITC Timber operations to Gunns for $100m further reducing its debt burden. The company was also placed in a trading halt on the news that it was conducting a capital raising for as much as $500m.
> 
> ...




(my emphasis) It is presently trading around $57.


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## Calliope (7 September 2009)

Well they got that wrong. I think the 20% drop in ELDPA this morning mainly resulted from the news that there is a two year suspension of dividends.

I think the sell off is a bit overdone, when you consider that that the loss in selling far exceeds two years of dividends, and Elders future seems much brighter than it was a week ago


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## jbl1971 (7 September 2009)

ELDPA comes onto the radar for me now as there isn't the degree of risk of capital loss. The freeze on hybrid distributions was not anticipated by FIIG or the market generally. There is no doubt Elders came very close to falling over but Jackman has pulled off the great escape. ELDPA is an attractive way to play the recovery now.

Seems to be a retracement in a few hybrids. MXUPA is retracing to a buy range (up to $55.00).


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## Calliope (9 September 2009)

From FIIG Securities Research;

Hybrid Update - PERLS 3 not 5 the Top CBA Hybrid

A lot can happen during a week in financial markets. In last week’s edition of ‘The Wire’ we highlighted how the new Commonwealth Bank hybrid, PERLS 5, was good relative value compared with other bank converting preference shares but actually offered a lower spread than another of the bank’s hybrids – the PERLS 3.

Since then, that differential in spread has widened even further due to a sell-off in PERLS 3. We suspect the main reason this security has been sold down is so investors can find the cash to purchase PERLS 5. This has resulted in the spread on the PERLS 3 increasing to 5.47% – or 2.07% more than the PERLS 5 offer.

The following chart illustrates the price performance of the PERLS 3. There has been some volatility in the price recently but the vast majority of the sell-off occurred after the PERLS 5 was launched.

As mentioned in our past review the structure of the two securities isn’t the same. The PERLS 5 has more favourable terms for investors due to its shorter term, higher cash coupon and greater certainty in its conversion clauses. When the difference in spreads was around 1.00% it was a line ball call as to which security was preferred, however, now that the spread has more than doubled, the PERLS 3 are clearly the most attractive Commonwealth Bank hybrid on the market.


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## Bill M (6 October 2009)

This interest rate rise today is the first of what may be a few to come. This is what I have been predicting will happen. As the bank bill rates rise so too will most hybrid securities incomes. In the case of PERLS V the yield should be grossing 7% on the coupon now. More will follow and this in turn should bring up the prices of all good quality hybrids.


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## Tysonboss1 (16 October 2009)

Warren Greenspan said:


> Howdy all
> I've become interested in interest rate securities esp some of the hybrids.
> I've been accumulating BEPPA (plenty of helpful info here on ASF, thanks BB) and am interested in GNSPA.




I hope you have done well on the recent surge of beppa. you should have booked a tidy profit.

I sold have sold out of beppa completely now at a tad over 37cents After buying in at 8.9c.


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## boofhead (23 October 2009)

IANG is up for vote in December. IAG want to adjust a number of conditions including reset date and margin. Much more details in the ASX annoucement.


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## awg (23 October 2009)

market liked it more than i would have expected, up 7%, on relatively large volume. 

I thought the consensus likely outcome was they would covert.

Seems like 4% over BBSW is deemed safe enough.

At price now around $98, i wont be buying anymore, but will hang on to what i have for my defensive segment, bought at $75


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## jbl1971 (29 October 2009)

The IANG terms offered are a good result and clearly the change will be approved. I believe that they will trade above face value in the not too distant future which would be comparable with the lower rated TAHHA (4.25% margin and trades at 7% premium to face value) and CBAPA (3.4% margin and trades at 2.7% premium to face value).

The existing IAG preference share IAGPA is a fixed rate security and trades at (or a fraction above) face value and has a fixed fully franked dividend rate of 5.63%. In the current interest rate environment I expect IANG to yield in excess of this so this further justifies a premium.

I wish I had hung onto mine instead of taking profits!


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## Bill M (10 November 2009)

ANZ is launching a Convertable Preference Share Offer, "CPS2"

Margin expected to be in the range of 3.10%-3.30% per annum

Mandatory Conversion Date
(subject to mandatory conversion conditions)
15 December 2016

All the announcements can found at asx.com.au website.

I think this might pan out the same way as PERLS V (the conditions and rates are similar). Anyone have an opinion?


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## rbourne1 (10 November 2009)

With a yield close to 7% the ANZ new issue hybrid will be heavily supported. Given the recent CBA Hybrid listed at $206 (face vale $200) I would expect a list price of $102-$103. 
With the expectation of higher interest rates the floating rate Hybrids are a good alternative to fixed interest options and anyone seeking a regular income stream. Before the GFC the acceptable margins on these securities was in the range of .5 - 1.0% above the 90 day BBR. The markets perception of credit risk has forced companies and banks to offer a higher margin. With margins over 3%, hybrids offered by the major banks provide a relative low risk/good return option. 
It will be interesting to see what the ANZ will do with the $750m raised. Probably looking at another purchase or takeover?


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## ricee007 (15 November 2009)

rbourne1 said:


> With a yield close to 7% the ANZ new issue hybrid will be heavily supported. Given the recent CBA Hybrid listed at $206 (face vale $200) I would expect a list price of $102-$103.
> With the expectation of higher interest rates the floating rate Hybrids are a good altersnative to fixed interest options and anyone seeking a regular income stream. Before the GFC the acceptable margins on these securities was in the range of .5 - 1.0% above the 90 day BBR. The markets perception of credit risk has forced companies and banks to offer a higher margin. With margins over 3%, hybrids offered by the major banks provide a relative low risk/good return option.
> *It will be interesting to see what the ANZ will do with the $750m raised. Probably looking at another purchase or takeover?*



Hm, probably keep it with their already too large surplus cash pile *rolls eyes*. Sigh at ANZ.

Then, perhaps, eventually, spend it on Asian assets. But, there stock pile is already well big enough, and their T1 ratio is more than all of the banks... BEFORE issuing these $750m. I just can't see why they raised this capital. It's annoying.

IANG is tempting... 4% above BBSW for 10 years is tempting, I will admit. Just not quite sure how screwed around with conversion, etc I'll be. I'll look into it (specifically, the terms of the preference shares!

My MXUPA and GNSPA are doing well, and my FXJPB are holding steady


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## rbourne1 (16 November 2009)

Yes, I think the major bank hybrids can be used as the benchmark. Any margin achieved above the major banks carries extra risk. As an alternative to fixed interest I like to stick with A plus credit ratings. Australia is lucky to have all 4 major banks out of 9 in the world to have a AA rating or higher.
Lonsec provide a good summary of listed income securities here


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## rbourne1 (17 November 2009)

Don't think the link above works.  Try this here


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## pajdons (17 November 2009)

Thanks for the link - good details on available issues.

Cheers


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## ricee007 (17 November 2009)

Anyone here capable of a discussion about MXUPA ?


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## cheeyeen (20 November 2009)

The bank hybrids will probably be under a lot of pressure today.

http://www.smh.com.au/business/moodys-may-downgrade-24b-in-hybrid-securities-20091119-ip0c.html


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## rbourne1 (20 November 2009)

Thanks for sharing that article cheeyeen.

A good example of how negative media reporting could sway public opinion.

To suggest that APRA could step in and stop dividends being paid on Hybrids is a bit unrealistic. If that happened, it would trigger the dividend stopper which stops all dividends to ordinary shareholders. Could you imagine the ramifications of any of the big 4 banks not paying an ordinary dividend to its shareholders?

And let's not forget the big 4 Aussie banks have credit ratings of AA and are rated in the top 9 safest banks in the world. 

It will still be interesting to see how the market reads it.


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## cheeyeen (20 November 2009)

rbourne1 said:


> Thanks for sharing that article cheeyeen.
> 
> A good example of how negative media reporting could sway public opinion.
> 
> ...




Yah.  I was thinking about the same line.  I am a bit surprised that Moody thinks in the line of putting hybrids as debt, but they are actually preference shares of the company.  So they should be carrying the same rating as the bank share itself as they ranks higher compare to the ordinary shares.  True that APRA can put in a dividend stopper if the banks' capital is in trouble, but only if the banks are in trouble.  They won't be in position to pay dividend anyway if that is the case.  The major effect would really be on those funds that have a mandate to invest in bonds/interest bearing securities that have a rating of A or higher etc.. They will be forced to sell if there is a downgrade because of technical issue.

Looks like the market is not very stress at the moment anyway.  Will see how it is when Moody makes the final rating change.


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## rbourne1 (20 November 2009)

cheeyeen said:


> Yah.  I was thinking about the same line.  I am a bit surprised that Moody thinks in the line of putting hybrids as debt, but they are actually preference shares of the company.  So they should be carrying the same rating as the bank share itself as they ranks higher compare to the ordinary shares.  True that APRA can put in a dividend stopper if the banks' capital is in trouble, but only if the banks are in trouble.  They won't be in position to pay dividend anyway if that is the case.  The major effect would really be on those funds that have a mandate to invest in bonds/interest bearing securities that have a rating of A or higher etc.. They will be forced to sell if there is a downgrade because of technical issue.
> 
> Looks like the market is not very stress at the moment anyway.  Will see how it is when Moody makes the final rating change.




Yep, I agree. I can't see the market taking it too seriously.


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## ricee007 (8 December 2009)

Hey Guys,

Hybrids are very under researched by retail investors, which is why I wrote an article yesterday.....

Published at http://ozbankers.com/index.php?option=com_content&task=view&id=30&Itemid=29 .... which some people considering investing in hybrids may find interesting.


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## awg (8 December 2009)

ricee007 said:


> Hey Guys,
> 
> Hybrids are very under researched by retail investors, which is why I wrote an article yesterday.....
> 
> Published at http://ozbankers.com/index.php?option=com_content&task=view&id=30&Itemid=29 .... which some people considering investing in hybrids may find interesting.





thanks rice007, found that informative


have a question if I may?  (anyone can answer)

what is the easiest way to get information for the ex-dividend and record dates of various hybrid issues, short of reading the original prospectus.

the dates dont seem to be listed on the ASX website in the same manner as ordinary securities...or am I missing something?

Presently I get the relevant info from various websites such as Fiig, Lonsec and the original prospectus


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## Calliope (8 December 2009)

awg said:


> what is the easiest way to get information for the ex-dividend and record dates of various hybrid issues, short of reading the original prospectus.
> the dates dont seem to be listed on the ASX website in the same manner as ordinary securities...or am I missing something?




Go to;
http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=CONVERTIBLE_NOTE

It also gives a link to the anns.


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## awg (8 December 2009)

Calliope said:


> Go to;
> http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=CONVERTIBLE_NOTE
> 
> It also gives a link to the anns.




thanks Calliope, exactly what I wanted.

ask and ye shall be answered, praise be to ASF


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## ricee007 (8 December 2009)

awg, cheers.

Do you have an email address....? PM me and I'll see if I can help you out just a touch more....


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## ricee007 (10 December 2009)

http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc might be useful to people considering hybrids?


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## Calliope (10 December 2009)

ricee007 said:


> http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc might be useful to people considering hybrids?




Nothing new here. That link was given by hardyakka in post #10 eight months ago.


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## Bill M (18 December 2009)

rbourne1 said:


> With a yield close to 7% the ANZ new issue hybrid will be heavily supported. Given the recent CBA Hybrid listed at $206 (face vale $200) I would expect a list price of $102-$103.
> With the expectation of higher interest rates the floating rate Hybrids are a good alternative to fixed interest options and anyone seeking a regular income stream. Before the GFC the acceptable margins on these securities was in the range of .5 - 1.0% above the 90 day BBR. The markets perception of credit risk has forced companies and banks to offer a higher margin. With margins over 3%, hybrids offered by the major banks provide a relative low risk/good return option.
> It will be interesting to see what the ANZ will do with the $750m raised. Probably looking at another purchase or takeover?



You were right mate, they raised around $2 Billion of tier 1 capital. Who said there is no money around? These offers are swooped up in no time at all, scale backs will apply to broker firm and the institutional offer applicants. As a security holder I got everything I applied for.

It starts trading today at 11 AM on a deferred settlement basis, I wonder what it will open at? Going by the recent offers like CBA PERLS V I would guess it to open at between $102 to $103 mark, could be wrong though. I could be tempted to sell.


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## rbourne1 (18 December 2009)

Bill M said:


> You were right mate, they raised around $2 Billion of tier 1 capital. Who said there is no money around? These offers are swooped up in no time at all, scale backs will apply to broker firm and the institutional offer applicants. As a security holder I got everything I applied for.
> 
> It starts trading today at 11 AM on a deferred settlement basis, I wonder what it will open at? Going by the recent offers like CBA PERLS V I would guess it to open at between $102 to $103 mark, could be wrong though. I could be tempted to sell.




Disappointing open but not a good day to list either with the DOW pulling back overnight and the banks being hit.

You're right though Bill M, it does show that the institutions are/were still cashed up.


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## Calliope (31 December 2009)

2009 was my best year yet, and all due to picking up high risk hybrid securities on their lows and following the advice of FIIG Securities on "The Wire."  And the winner is ...MXUPA


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## nathanblack (31 December 2009)

Calliope said:


> 2009 was my best year yet, and all due to picking up high risk hybrid securities on their lows and following the advice of FIIG Securities on "The Wire."  And the winner is ...MXUPA




MXUPA has been a good one for me too. Do you think it will step up in April 2010 or be redeemed? I think its moving up closer to $100 because people know Brookefeild have the funds and redemption seems likely. 

Either way 1.9% step up will be fine too.


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## Bill M (22 February 2010)

It is always fair to comment on disappointments as well as successes.

Today the Seven Network made several announcements and SEVPC was affected. The price on these dropped 5.5% or $5.32 in one day.

The disappointed was that punters were probably betting for a full conversion at $100 face value, it doesn't look like it's going to happen.

However, from what I understand Telys 3 (SEVPC) holders will be offered a 1 for 1 deal in the new Telys 4 offer if the vote for the scheme of arrangement goes through.

What does it mean for us holders? TELYS4 will be issued on similar terms to TELYS3 and will pay dividends equal to the TELYS3, including the rate after the step up from 31 May 2010 (BBSW +475bps)

I always knew that the step up could happen and it looks like it will. That means approximately 9% dividends on your capital outlay, not that bad really.

Anyhow these are some of the risks with hybrids, cheers.


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## ricee007 (22 February 2010)

Hmm, I considered SEVPC, but, stuck with FXJPB instead.

FXJ released good results, but would have thought FXJPB would have moved up by more than 9cents...

GNSPA down $7.90 was the big surprise. I was just saying last week that GNSPA would be my #1 pick atm.

Still, with great NTA, good cashflow (IIRC?), still turning a profit, an improved outlook... GNSPA still seem safe.

Redemption next year is now more likely than October this year, as I had hoped.... but, if GNS want to give me $9.25 for each GNS I hold (increasing to $10 in the not too distant future!) I'm quite happy to buy more at $70.


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## jbl1971 (23 February 2010)

Been a while since I posted. A bit like Calliope I had an amazing year with hybrids and came to respect "The Wire" issued by FIIG. Had coffee with a FIIG Securities broker the other day and discussed the opportunities in the market.

It made sense that SEVPC should have been redeemed but everyone I talked to was nervous about what Stokes would do. I had sold half just in case and I sold as quickly as I could after the trading halt. There are better value hybrids now as who knows what the underlying Seven business will look like in few years. You have to hand it to Stokes - why give the money to SEVPC holders when you can sell your own business in. As the price sinks they become worth holding - say mid $80s.

GNSPA have been the appealing story but their result rocked the market and caught me long. They are really good value at about $65. Company management have also stated that they will look to redeem them in about 18 months (but results will need to bounce back). They are only a small issue at $120m. The market has priced them as if redemptions might temporarily be suspended.

I have to be honest and say I no longer hold FXJPB as it seems expensive relative to other hybrids. They don't step up until 2012 and don't seem to offer relative value.

MXUPA has trended down to $74 / $75 which undervalues them a little bit. They wont be redeemed until there is a fundamental change in debt markets. I work in the property industry and was formerly in banking and I am staggered at the current lack of willingness of Australian Banks to lend for commercial property and development. No matter who you are (such as Brookfield) you don't repay loans that you don't have to at the moment.

FIIG have been pushing PXUPA at an investor roadshow they have been running. There has been a small spike in price as a consequence. I can see their story. Paperlinx have a very lowly geared and liquid balance sheet. As at 31/12 they had a working capital excess of approx $860 million - that is some serious liquidity. Management are strongly hinting that they will make catch up hybrid payments ... we'll see.

AAZPB have been a good recommendation but jumped in price recently after Jim Stenniing from FIIG recommended them in Eureka Report.

I must say I still yearn for the old days of MXUPA $20, GMPPA $10 and the like but some hybrids still offer great value.


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## jbl1971 (23 February 2010)

Just realised that I made a mistake. FXJPB step up in April 2011. But with a current margin of 1.55% and a step up of 2.25% I still think there is better value elsewhere.


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## ricee007 (24 February 2010)

Hmm, there MAY be better value than FXJPB (GNSPA at $65, for example!!!)... but, in the media section, I much prefer FXJPB over SEVPC!

I worked out a circa 19.5% yield on FXJPB... which, for the risk, seemed quite a good deal for me... but, of course, depending on your risk profile, there may be better securities out there. I'd probably prefer a  few more, but 10.5% of my portfolio is alright.


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## boofhead (4 March 2010)

Appears Moody's has downgraded banking hybrids by 2 notches. CBA put out a release. Moody's didn't rate PERLS V so they are unchanged. S&P has not rerated any yet.

Does anyone expect the higher risk rating to translate in to slightly lower prices? I don't expect the majors to have much price degradation with rising interest rates.

If new issues arrise hopefully it means healthier margins which would otherwise be reduced due to improvements in the markets.


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## awg (4 March 2010)

There might be some selling pressure, as some big funds are mandated to hold
a specified grades of security in various proportions.

I read an article somewhere to this effect, but it also noted effects might be hard to gauge due to other agencies not re-rating.


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## Bill M (7 April 2010)

Nearly all the listed Hybrids jumped yesterday on the news of the increase in interest rates, nice to see green all over my porfolio for a change. Bought another batch of SEVPC with the intensions of holding and collecting decent dividends for the future and possible capital gains to come. A few more rate rises will be good news for hybrid and note holders.


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## Calliope (7 April 2010)

Bill M said:


> Nearly all the listed Hybrids jumped yesterday on the news of the increase in interest rates, nice to see green all over my porfolio for a change. Bought another batch of SEVPC with the intensions of holding and collecting decent dividends for the future and possible capital gains to come. A few more rate rises will be good news for hybrid and note holders.




Yes, the hybrids love interest rate rises and my portfolio jumped accordingly. I didn't hold SEVPC and yesterday bought 300. They look very attractive having dropped about $10 and will now be returning about 11% yield.


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## ricee007 (7 April 2010)

If GNS sells some assets for a decent price, Mitre10, wine and construction.... I'll be throwing myself at some GNSPA. Might even make them my second highest holding. Perhaps evenb if GNSPA declares a 2nd half dividend, as intended... that may be my signal.

MXUPA is also looking tempting again... but, I think FXJPB provides better value.

ELDPA is also always tempting, but, not quite enough yet. Probably going to be around this SP for say 10-12 more months.

SEVPC is nice, but I'm not 100% sure on all the details. It looks like they'll step up and become "perpetual" @ 4.75% above from 1st June 2010?

@ $85, $9.25 in interest = 10.88% running yield... +18% redemption value sometime in the next few years. Presume its in 3 years time, 17% per annum yield. Though, AFAIK, no time-frame for redemption has been set?

Equivalent of $2.35 non-franked dividend to be paid on circa 14th July... with an ex-date of circa 30th June. I might need some by then.


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## Bill M (7 April 2010)

Calliope said:


> Yes, the hybrids love interest rate rises and my portfolio jumped accordingly. I didn't hold SEVPC and yesterday bought 300. They look very attractive having dropped about $10 and will now be returning about 11% yield.




You're a clever man, got it at a good price and a dividend drop coming next Month, well done.


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## Bill M (7 April 2010)

ricee007 said:


> SEVPC is nice, but I'm not 100% sure on all the details. It looks like they'll step up and become "perpetual" @ 4.75% above from 1st June 2010?
> 
> @ $85, $9.25 in interest = 10.88% running yield... +18% redemption value sometime in the next few years. Presume its in 3 years time, 17% per annum yield. Though, AFAIK, no time-frame for redemption has been set?




You have worked it out pretty well. As I understand it, it is perpetual and I have accepted this and that is probably why people wanted to get out of it. I look at it a different way. I think Seven Group will be a better company after the restructure. I also think telys4 will be much better than telys3 and the dividend is extremely good. My opinion is that once all of the sellers who have been spooked sell their stocks then the price will improve slightly until the ex dividend date. 

Then in the future as interest rates increase this Hybrid may get re-rated upwards. I believe and hope this will get the price up to somewhere in the $90 to $95 mark. As rates rise in the future the interest burden might get a bit too much for the new Seven Group and they may repurchase the hybrids. (You never know and it could happen) They can repurchase for face value of $100 at any dividend payment time as far as I understand. In the mean time I am happy to hold at these prices and these dividends and I am ready to sell on market when or if the price improves and I feel like selling. I suggest to anyone who is interested in investing in these to read all the scheme booklets and the telys4 prospectus and good luck.


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## ricee007 (7 April 2010)

4.75% for a low-medium risk large company is, historically, a very high margin. Hell, 3% is, historically, high.

So, I do expect conversion one day. However, considering that they are being "re-offered" (effectively)... it would seem not for a couple of years. Would 3 be your estimate? Longer? Shorter?

Now, I know I might be being optimistic, but, I'd prefer 15% ROI... SEVPC @ 11% just doesn't *quite* cut the mustard.... For that reason, if I can jump out of FXJPB @ near $95, I very much might. $94 ex-div would be a dream come true, but, probably need to see the market increase substantially, *AND* news that increases the likelihood of a May RBA increase... so, seems unlikely in the immediate term.

With most hybrids stepping up lately (at least, the ones I've been looking at, MXUPA, GNSPA and SEVPC, for example!), I'm now less sure that FXJPB will be converted in April 2011.... so, wouldn't mind getting out, if the price is right.


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## Bill M (21 April 2010)

Nice jump on SEVPC today, up 3.5% with a divi next Month to come.


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## So_Cynical (21 April 2010)

Hastings HDF is going to pay out TAPS, ive no idea why i took them 5 months to get around to announcing it :dunno: quote the ann below.

Hastings Funds Management Limited, as Responsible Entity for the Hastings Diversified Utilities Fund and the TAPS Trust, today advised that 100 percent of the Trust-issued Adjustable Preferred Securities (TAPS) will be redeemed and repaid in full on 30 June 2010 and TAPS investors will receive a cash redemption amount of $100 per TAPS security plus distribution for the quarter ending on 30 June 2010.

http://data.iguana2.com/hastings/news-item?Number=334941&Code=HDF


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## fj20det (24 April 2010)

I have held (and still hold) GNSPA for several years and enjoyed excellent yield. In search of the Holy Grail of cash redemption which I thought might occur around mid 2011, I have several questions.

I have seen GNSPA drop as low as $46 on 26 Feb 09. At these prices why wouldn't Gunns buy them back on the open market, effectively repurchasing $120m of 'expensive' debt for $60m?

GNSPA liquidity is very low with daily trade totals often in the hundreds. On 26 Mar 10 I was interested to see on off market trade of 175,000 GNSPA  @$56 when the market price was $58. This is about 15% of issue in one trade!

Gunns annual reports have never disclosed any GNSPA holdings. Am I looking in the wrong place?

Where can you see who the majority holders of GNSPA are?

The recent decision of Gunns not to pay the interim dividend gives them the right not to pay any GNSPA distribution on 14 Jul 10. Does it also mean they do not have to pay the 14 Oct 10 dist or would this also require no final div for GNS?


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## ricee007 (24 April 2010)

I think you'll find we are still quite a while away from no divis on GNSPA...

AFAIK, I didn't think preceding dividends were relevant when considering whether or not GNSPA had to pay a dividend. I thought it went the other way->GNS can only pay if GNSPA paid their last dividend*...

Your thoughts RE: repurchase need to be reconsidered.
IF GNS had the spare cash needed to rebuy GNSPA, would they be trading at $46?
*IF* GNS tried to rebuy GNSPA, do you think that GNSPA would remain at $46?

*With possibly needing 2 GNSPA dividends in a row in the case of a dividend restart?

I want to get out of FXJPB, and, I'm kinda annoyed that I'm sticking with my 90.89 price, when I prob could have got 90.45.

Just not sure. I want to get into STO, but, looking at the chart, could easily fall a little while yet.... when it starts to bounce, I may @market sell FXJPB and jump into STO... but it is notoriously hard to pick the bottom.

My GNSPA exposure is quite low... but, the risk of them stopping the dividend payment in, say, 6 months time, has prevented me from topping up... Circa 15% running yield is a fantastic opportunity, if they keep paying.

I suspect the next couple will be paid, esp. given the small issue, but... if they have another bad year, then, potentially, might find it hard.

The BEST thing that could possibly happen (besides someone offering to buy GNS and offering GNSPA holders $100) would be if GNS released that the PulpMill is no longer going ahead... so, they have tonnes of spare capital and enough cash . Might be devastating for GNS holders, but, I can only see it as a positive for GNSPA.

MXUPA is kinda tempting, esp at around $75....@ circa 11.2% running yield.... but, just not quite sure if these will be converted in the next couple of years.... Could hang around $80, up to $85 for the next 2 years....


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## So_Cynical (24 April 2010)

ricee007 said:


> The BEST thing that could possibly happen (besides someone offering to buy GNS and offering GNSPA holders $100) would be if GNS released that the PulpMill is no longer going ahead... so, they have tonnes of spare capital and enough cash . Might be devastating for GNS holders, but, I can only see it as a positive for GNSPA.




Its probably fair to say that what's good for GNS holders is also good for GNSPA holders, and abandoning the mill would be share price positive for both i would think..even thou the economics of selling chips @ around 200 a tonne -V- Pulp @ 900 a tonne seem pretty clearly in favour of a mill.


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## ricee007 (24 April 2010)

So_Cynical said:


> Its probably fair to say that what's good for GNS holders is also good for GNSPA holders, and abandoning the mill would be share price positive for both i would think..even thou the economics of selling chips @ around 200 a tonne -V- Pulp @ 900 a tonne seem pretty clearly in favour of a mill.



Hmmm, not necessarily.

In this case, I think a big partner coming in and funding 50% of the mill would be be best for GNS....

But, no mill best for GNSPA.

Anyway, enough about that, whats everyones favourite Hybrid atm?

I don't know if FXJPB will step up in 12 months time or not.... (it is april 2011, right?)... 17% return is fantastic if they are converted, but, it's not quite so good if they step up...


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## Bill M (24 April 2010)

ricee007 said:


> Anyway, enough about that, whats everyones favourite Hybrid atm?




Mine is PERLS V.
Up 3.6% since listing (that's after going ex dividend)
Mandatory Conversion in 5 years
Good dividend paying a 3.4% margin above the BBSW (That is 7.8% total now)
Rock solid parent company CBA


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## Calliope (25 April 2010)

My favourite is MXUPA
Medium Risk
Running yield 10.3%
Cheap at around $80.5

My best earner is AAZPB which I have held for a long time, also medium risk but about $10 dearer.


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## ricee007 (25 April 2010)

PERLSV don't have a high enough yield for me.

MXUPA @ $80 seems fairly priced... if I could grab @ $70, I'd instabuy.... if I could buy some @ $75 I'd probably buy.

There just doesn't seem to be any outstanding Hybrids left ->Not really since the days of MXUPA being $69.

Hmmm, perhaps GNSPA is the exception.... but, it's too risky to chuck 20% of my portfolio in ATM.... If the market likes the recent announcment on Tuesday, *AND* they announce a GNSPA dividend again..... and GNSPA is heading up (say, circa $69), I may just couple another 10% of my holdings (IE: my current FXJPB holdings into there)->Adding about 140% to my current holdings.

But, it'll depend on when I sell FXJPB, if STO looks like it is bouncing, etc


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## shiftyphil (21 May 2010)

ricee007 said:


> MXUPA @ $80 seems fairly priced... if I could grab @ $70, I'd instabuy.... if I could buy some @ $75 I'd probably buy.




Might get a chance at that price today.
Naturally I stocked up last month, right at the peak. 
(Looks like a mostly positive announcement just came out while I was writing this, maybe it won't get dragged any lower.)

Found this while googling, has a good listing of hybrids with yields, updated most days:
http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc


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## fj20det (25 May 2010)

With GNS now at 26 cents we are in the zone for Issuer Exchange where Gunns may, at its sole discretion, convert GNSPA at the maximum conversion number of 407 GNS ords. At 24 cents this converts at less than $100 face value. Exchange is unlikely given Gunns is reducing debt (GNSPA is not treated as debt) but we are in the zone!

GNSPA at $54 cum div $1.69 14 Jul 10 with record date of 30 Jun 10


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## Calliope (31 July 2010)

It is obvious that hybrid securities have little interest to posters on this stock forum. In my opinion they are a sadly neglected avenue for making your money work for you. During the GFC I divested myself of all but a handful of stocks and invested in Term Deposits and Hybrid Securities.

I have done very nicely with the latter with yields double term deposits and often franked. You have to know what you are doing (and that applies to all ventures) but there is some good advice on offer. I usually mange to unload them at a profit when the price climbs and running yield drops.

I am taking Nioka's advice and trying to breathe some life into interest in stocks. But I fear with Hybrids it will be love's labour lost.

However for what it's worth you may care to have a look at some of the running yields.

http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc


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## boofhead (31 July 2010)

I find sentiment of RBA increasing rates (sadly August looks like it will be a pass) see hybrids offer payments that move along with interest rate movements.

FIIG seems to have plenty of writeups on hybrids.


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## brianwh (3 August 2010)

Calliope said:


> It is obvious that hybrid securities have little interest to posters on this stock forum. In my opinion they are a sadly neglected avenue for making your money work for you. During the GFC I divested myself of all but a handful of stocks and invested in Term Deposits and Hybrid Securities.




Agree Calliope - would very much like to see more discussion/analysis on both specific securities and, more generally on where they might fit into a balanced SMSF portfolio. I hold NABHA which has been a solid, though not spectacular, performer and will probably add 2 more with a bit more risk and therefore a bit higher return eg IANG and AAZPA.

I find the whole area complex and difficult to feel comfortable with (which many would say means I should stay away from them). I have been looking at material from the FIIG group who specialise in this area but their charges - about $125 per transaction - makes them an expensive option. Of course good advice would quickly make up for this.


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## Calliope (3 August 2010)

brianwh said:


> I have been looking at material from the FIIG group who specialise in this area but their charges - about $125 per transaction - makes them an expensive option. Of course good advice would quickly make up for this.




I take their advice which costs nothing , but trade with Comsec.  At present I have AAZPB, GNSPA, HBSHA, MXUPA and SVWPA, all recommended by FIIG.

HBSHA is too dear to buy now, but I bought them when they floated.


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## ricee007 (4 August 2010)

HBSHA sounds interesting, pity I missed out when they floated!

MXUPA would be my next purchase, if I had the money... but, I prob won't have the money until December (or, if I sell STO)....

I can't pick what will happen to FXJPB - I sold out at $90 or so... I almost get the feeling that they'll step up in April 2011 due to some not so brilliant FXJ results....

ATM, as far as Hybrids go, I am only holding GNSPA... which I still think is very underpriced. You can pick them up for around $66.66....

So, 5% above + 4.9% BBSW = $9.90 per GNSPA per year = 14.85% per year in interest (off the top of my head).... plus 50% when they are converted -> GNS won't pay 5% above the BBSW forever - I mean - they are the most expensive on the Macquarie list.

I am kicking myself for not jumping into CHBGA at $350 or so.


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## Calliope (4 August 2010)

ricee007 said:


> HBSHA sounds interesting, pity I missed out when they floated!




When I said that HBSHA were too dear I was speaking relative to my other holdings. At their present price they have a yield of 9.35%. They are held for their reliable income and are very thinly traded. Heritage Building Society is a very reliable company.


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## ricee007 (4 August 2010)

9.35% with Heritage...

Or circa 9% with Bendigo Bank/MacBank...

8.69/8.78

Heritage at $100, 10% + Capital Gains potential would have looked very interesting.....

For some people, the extra risk of Heritage would still be worth it... yes, I agree.

However, I'd rather a higher yielding MXUPA/GNSPA - personally.


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## GCrenegade (4 August 2010)

I am really interested in the Hybrid Securities / Fixed Interest instruments, but I am still very much a beginner. Currently half way through a finance and economics degree and I am seriously considering this area as a career path. I hope people continue to add to this thread as I have found it very helpful. Thanks to everyone


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## brianwh (30 August 2010)

Several posters have mentioned RHCPA on this thread so perhaps one of them or someone else with greater understanding than me can explain the following:

RHCPA is currently trading around $95 and has a call date of Oct 2010. As I understand it, they will either pay out $100 at that time, convert to preference shares or step up to a higher interest rate. I would have thought any of these results would be positive yet FIIG Securities has a "sell" on them.


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## brianwh (30 August 2010)

Sorry - just read a report on the FIIG Securities website dated 27/08/2010 which explains their reasoning. They quote the company as confirming that it will not redeem RHCPA but will step up to a higher interest rate. They say that when this has happened with simiar hybrids the price has gone down.


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## Warren Greenspan (3 December 2010)

Howdy brothers and sisters. 

Anybody taking an interest in the secured and subordinated notes about to be released by HEALTHSCOPE? 
They'll pay a fixed 11.25%pa paid quarterly and the offer closes Dec 9.
I think they'll trade as HLN. and can be purchased initially in $5000 lots.
That's about all I know at this stage. I only heard about them today. I'm hoping to contact FIIG on Monday and see what they say.

Info or thoughts anyone?


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## boofhead (3 December 2010)

If you're a registered user at FIIG why not check The Wire? It has a little about Healthscope offer.


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## tothemax6 (4 December 2010)

Warren Greenspan said:


> Howdy brothers and sisters.
> 
> Anybody taking an interest in the secured and subordinated notes about to be released by HEALTHSCOPE?
> They'll pay a fixed 11.25%pa paid quarterly and the offer closes Dec 9.
> ...



Yeah I was pretty interested in these, but I don't think I'm ready to buy something like these yet for the following reasons:
I think interest rates will go up in the future (hence hurting the bond)
The term is 5.5 years
They have only said 'they have applied to the ASX' for listing, which I see as a non-guarantee
Cheers


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## ricee007 (4 December 2010)

tothemax6 said:


> Yeah I was pretty interested in these, but I don't think I'm ready to buy something like these yet for the following reasons:
> I think interest rates will go up in the future (hence hurting the bond)
> The term is 5.5 years
> They have only said 'they have applied to the ASX' for listing, which I see as a non-guarantee
> Cheers



1. your thoughts on the interest rates are fair enough. Each has to determine if the interest rate is enough to parlay the risk. For me, it is not quite enough...... but, for some, it will be.

2. whilst not being listed on the ASX is a risk......this is just a standard line. no-one can guarantee the ASX will allow listing.... for example, if no-one buys any of the notes they won't be listed on the ASX


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## Calliope (4 December 2010)

ricee007 said:


> 1. your thoughts on the interest rates are fair enough. Each has to determine if the interest rate is enough to parlay the risk. For me, it is not quite enough...... but, for some, it will be.
> 
> 2. whilst not being listed on the ASX is a risk......this is just a standard line. no-one can guarantee the ASX will allow listing.... for example, if no-one buys any of the notes they won't be listed on the ASX




FIIG equates these as suitable for "the higher risk investor", which should rule me out. However I have applied for 200 ($20,000). I feel they will list at a premium. The general offer closes on 9 Dec.

I feel safer with medium risk hybrids like AAZPB, MXUPA and SVWPA which all yield about 11% on current prices. They have proved good earners for me.


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## Warren Greenspan (6 December 2010)

Howdy all

 Tothemax, I don't think you need to worry about them not listing. Page 26 of the prospectus says that if not accepted by ASX then all monies refunded.

Spoke with a main man at FIIG today.

Basically they will be recommending as a higher risk Buy with the 11.25% enough reward.

He also reassured me on a few other specific q's I asked.

I'll most likely be applying for about 10K myself. They'll fit nicely with my other "high risks" that I hold aazpb mxupa pxupa eldpa etc
Gotta go, at work


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## So_Cynical (14 December 2010)

I wonder if the new IMF convertible notes (IMFG) are classified as Hybrids? the notes seem to share many of the quality's of the classic hybrids....the notes are ASX listed, interest is paid quarterly, fully convertible 1 for 1, IMF can buy em back early and pay a small penalty, etc.

http://www.imf.com.au/announcements.asp


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## Calliope (22 December 2010)

So_Cynical said:


> I wonder if the new IMF convertible notes (IMFG) are classified as Hybrids? the notes seem to share many of the quality's of the classic hybrids....the notes are ASX listed, interest is paid quarterly, fully convertible 1 for 1, IMF can buy em back early and pay a small penalty, etc.
> 
> http://www.imf.com.au/announcements.asp




I notice they go ex-dividend tomorrow. At the moment their price is 1.75 which is a gain of 10c on their issue price. They look attractive at 10.25% interest on issue price and I imagine they would be low risk. I will consider them, depending on their ex-div price. 

They would pay 9.66% if bought at todays price, and that is not to be sneezed at. What do you think So-C?


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## Bill M (23 January 2011)

Lately I have been thinking of another way to squeeze a few bucks out of our hybrids. I have some carry over losses from the GFC that I can use any time in the future.

I have noticed that when a hybrid goes ex dividend it seems to drop well in excess of the dividend. For example lets say the divi is $3 per share, it is not uncommon for the stock to drop say $4 or $4.50 a share. 

I have been watching it for quite a while, a stock comes up to a week before ex divi and the price gets to it's highest ever. Then it drops just a bit before ex divi (a few cents) and then at ex divi it does the big plunge.

I will use SVWPA as my example as I hold them. The price now is around $92, lets say it creeps up to $96 and there is a $3 per share divi due. I could sell it at $96 and buy it back for say $92 after ex divi and pay no tax as I have previous losses. If I collect the $3 divi then I would be taxed (I know it is franked but you still get taxed) and I would cop a $4 capital drop. What do you guys think of this strategy? Cheers.


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## Beez (23 January 2011)

Bill M said:


> Lately I have been thinking of another way to squeeze a few bucks out of our hybrids. I have some carry over losses from the GFC that I can use any time in the future.
> 
> I have noticed that when a hybrid goes ex dividend it seems to drop well in excess of the dividend. For example lets say the divi is $3 per share, it is not uncommon for the stock to drop say $4 or $4.50 a share.
> 
> ...




Just remember to read the prospectus for each hybrid you look at to see whether it is treated like a regular security (and gains/losses are CGT events) or if it is treated as a convertible note or debenture (where gains/losses are treated as "other income" and you cannot use CGT losses to offset those gains - I believe the Elders hybrids fall into this camp ELDPA, as did the Myer notes). The section you want will be usually have tax or taxation in the title.


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## Bill M (23 January 2011)

Thanks for the suggestion Beez. I did a script for script rollover, from TELYS3 to TELYS4. This is what the prospectus says:

_*The first element of the cost base and reduced cost base for an investor in each TELYS4 acquired under the TELYS3 scheme should be equal to the cost base and reduced cost base the investor had in each TELYS3 exchanged plus any incidental costs incurred on acquisition*_.

To me that reads that if you paid $10,000 for TELYS3 then rolled them over to TELYS4 as I did under the scheme then your TELYS4 cost base would be $10,000 also. It then says:

_*If an investor disposes of it's TELYS4 in the course of trading on the ASX, a CGT event will occur. This will give rise to a capital gain or loss*._

I understand that to mean that if I sell and make a capital gain then I can use previous tax years capital losses to offset any gains. Is that how you guys understand it?


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## Bill M (25 January 2011)

Bought some more CBAPA today on a down spike. Someone had to offload in a hurry, they sold cheap. Bought at $207.50, watch where it will be in 2 Months time.

SVWPA creeping up as I thought they would. When they converted people were selling at $85, gee I love doom and gloom. Today finished up at $93.40.

CBAHA the Commonwealth Bank Bonds a dud, just like I thought they would be, didn't touch them. Closed at $100.50


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## prawn_86 (8 February 2011)

Ok so i am starting to seriously look at hybrids as a better way of gaining cashflow over my 'cash' proportion of my portfolio. 

So far, i can see that yeilds will generally be higher than an online saver, but you need to take company and market risk into account, and there could be a possible capital loss if i was forced to sell for unforseen circumstances.

Im wondering what those posters who do currently invest in hybrids are liking at the moment as i'm just looking at a place to start researching actual products, as i think i understand the basics of how the product class works, now i need to research details of each actual security.

One question i had was do members use leverage when purchasing hybrids? Or is it possible?

Any help appreciated.


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## Bill M (8 February 2011)

prawn_86 said:


> One question i had was do members use leverage when purchasing hybrids? Or is it possible?
> 
> Any help appreciated.




Hello prawny, yes you can borrow on margin to buy hybrids, I just don't do it though. When I clock into Commsec and do a quote for say SVWPA it will give me the quote plus the margin LVR (in this case 65%). The only thing is, is it worth borrowing at a 10% cost in interest to get a 10% dividend? The only reason I would think anyone would do that is if the hybrid is undervalued. 

Lets use GMPPA (I hold these). They are selling at around $76 right now. Their face value is $100, looks like a nice capital gain coming up doesn't it? But they may not convert at maturity. GMPPA has a step up if they don't convert. It means instead of the interest rate on top of the swap rate being 1.9% it will jump to 2.9% (percentages might be slightly out). But you are still holding that stock and the price after step up may still trade under face value. In this case borrowing to buy that stock may see your net winnings heads south.

If you knew a hybrid was going to be redeemed for sure and it is paying dividends and it is under face value then you stand to make a good profit, but, by the time you know this so will everyone else and it will be trading close to face value anyway.

My favourite hybrid right now is SVWPA (Telys4) Seven Group. They are paying the 4.5% on top of the 6 month swap rate. So at face value (swap 5% + 4.5%) you will get 9.5%. But in my case my average buying price was $88 so in fact my interest rate will be closer to 11%. The catch with SVWPA is that it is perpetual and in theory may not be redeemed for a very long time. That's why it is under face value. If Seven Group made an announcement tomorrow saying that they were going to redeem it the price will jump to almost face Value overnight. 

They are good dividend streams, you just need to know the rules for each hybrid. When the dividend drops into my bank account it makes it all well worth it.


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## prawn_86 (8 February 2011)

Thanks Bill,

Much appreciated.

I notice that quite a few hybrids tend to 'build up' in anticipation of the dividend. Do you ever sell and just take a capital gain or usually hold for longer term div stream?


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## Bill M (8 February 2011)

Because I have those carried forward losses from the GFC I might sell this time around. SVWPA goes ex dividend around May, the price might climb to around $96 by then, and an $8 capital gain per share looks pretty good and I won't pay tax on it. But if it hangs around the present $94 I would rather take the dividends.

I did sell BOQPC and TAHHA after listing. I bought the IPO's. 2.5% profit only on BOQPC but a nice 6% on TAHHA. Not big but I was only holding them a short time.


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## Calliope (8 February 2011)

prawn_86 said:


> Im wondering what those posters who do currently invest in hybrids are liking at the moment as i'm just looking at a place to start researching actual products, as i think i understand the basics of how the product class works, now i need to research details of each actual security.




Have a look at http://www.fiig.com.au/, You have to register though. Their Hybrid Summary sheets give buy, hold and sell recommendations. Their risk assessments (high, medium or low) are usually spot on. Usually the cheaper the hybrid, the higher the risk. Look at the running yield if it is dividend that interests you. 

My portfolio consistently averages around 10%, even during the GFC.


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## prawn_86 (9 February 2011)

Bill M said:


> My favourite hybrid right now is SVWPA (Telys4) Seven Group. They are paying the 4.5% on top of the 6 month swap rate. So at face value (swap 5% + 4.5%) you will get 9.5%. But in my case my average buying price was $88 so in fact my interest rate will be closer to 11%. The catch with SVWPA is that it is perpetual and in theory may not be redeemed for a very long time. That's why it is under face value. If Seven Group made an announcement tomorrow saying that they were going to redeem it the price will jump to almost face Value overnight.




So essentially, a perpetual security will generally always trade below face value, as there is no set date (if ever) that they will be redeemed? I also assume that perpetuals tend to get hit harder in a downturn?

I read earlier in the thread that you tend to try and avoid perpetuals, what made you choose this one? And what would you say the likelihood of them being bought back are, in your experience?



Calliope said:


> Have a look at http://www.fiig.com.au/, You have to register though. Their Hybrid Summary sheets give buy, hold and sell recommendations. Their risk assessments (high, medium or low) are usually spot on. Usually the cheaper the hybrid, the higher the risk. Look at the running yield if it is dividend that interests you.
> 
> My portfolio consistently averages around 10%, even during the GFC.




Thanks Calliope.

Do you mind if i ask what hybrids you're currently holding?


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## boofhead (9 February 2011)

Many perpetuals also have lower margins which pushes down price.

Depending on the company the hybrid/perpetual is associated with it may have smaller drops than the share price of the company.


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## Bill M (9 February 2011)

prawn_86 said:


> So essentially, a perpetual security will generally always trade below face value, as there is no set date (if ever) that they will be redeemed? I also assume that perpetuals tend to get hit harder in a downturn?





Not always. I own SBKHB formerly SUNHB. I bought it well before the GFC. It pays a measly .75% above the 3 Month BBSW. When I bought it, it was trading at around $99. There wasn't that much about then and I thought oh well it will always pay that .75% above the BBSW. At one time before the GFC it hit $102, I had a sell on them at that but it never got executed. Then it just went down a bit and kept on paying it's interest. Then the GFC hit, oh man it just went down like the Zeppelin. It think it got down to about $50 at one stage. Suncorp had a massive cloud around it, speculation it could collapse, nothing will save a stock with that hanging over it. Anyhow it didn't collapse and it always paid it's interest. SBKHB also pays what they call a cumulative interest rate. It means that if for any reason they don't pay their due interest it will accumulate and eventually they have to pay out all the accumulated interest. In a downturn the most risky get hit hardest. In my case in was SUNHB and GMPPA and both were the riskiest at the time.




> I read earlier in the thread that you tend to try and avoid perpetuals, what made you choose this one? And what would you say the likelihood of them being bought back are, in your experience?



I bought this one because the original TELYS3 had a step up/conversion date. It's interest rate was going to jump from 2.5% to 4.5% on top of the BBSW. Originally I thought Channel 7 would convert them. I thought Stokes had plenty of cash and didn't need these to step up at such high interest rates. Blow me down he decided to convert, that caught everyone by surprise (he is known for this) and the price headed down as everyone was banking on the buy back. I didn't sell however, I bought more. I thought hang on, they are going to pay me much more but the price is going down? Anyhow now it is in my favour, I will continue to hold and collect a gross dividend of 11% however I might pull the plug come dividend at $96 as it still is perpetual.

About them being bought back, I think that if interest rates keep going up they will get bought back. Lets say the BBSW goes to 8% then they will have to pay 12.5% in interest. I reckon they would refinance and get a cheaper loan rather than pay us so much. It is a gamble but to me it's like this, get good dividends in the meantime with a probability of a buy back. They have the right to buy back at any dividend time. Seeing as our rates haven't moved up I don't think they will buy back in May this year.

Apologies for not returning the PM as I only noticed it there this morning, cheers.


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## Bill M (9 February 2011)

Just as a side note, SBKHB went ex interest today. They dumped the stock big time and it's down 3.5% or in this case $2.60. The actual payment is $1.46. Just goes to show that at ex dividend/interest they usually dump bigger than neccessary. If you was to buy this stock today your running interest rate would be around 8.1%, not all that bad.


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## Calliope (9 February 2011)

prawn_86 said:


> Thanks Calliope.
> 
> Do you mind if i ask what hybrids you're currently holding?




AAZPB 400, MXUPA 400, SVWPA 400, IANG.300, HLNG 300, IMFG 20,000

Medium...... Medium ...... Medium.......Low.........High..........?....... FIIG Risk Ratings


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## So_Cynical (9 February 2011)

For anyone interested, i bumped into a LIC the other day that has a reasonably large exposure to Aussie listed Hybrid's.

IBC - Ironbark Capital is an absolute return focused LIC with about a third of there money in Hybrids....so could be a simple, low cost per share alternative for anyone wanting just a little exposure to Hybrids.

http://www.asx.com.au/asxpdf/20101125/pdf/31v4c6jp3zhtl2.pdf


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## prawn_86 (10 February 2011)

Any thoughts on PXUPA? Looks to be fairly risky hence the current price. And i noticed in one of the announcements they said that the 2009 distribution will lapse.



> Distributions: Unfranked, semi-annual, floating rate (2.25% at the moment above 180 day rate), discretionary and non-cumulative




Why would anyone want to own these?


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## skc (10 February 2011)

prawn_86 said:


> Any thoughts on PXUPA? Looks to be fairly risky hence the current price. And i noticed in one of the announcements they said that the 2009 distribution will lapse.
> 
> Why would anyone want to own these?




Looked at these some time ago but didn't pull the trigger...

According to Iress the last 2 dividends were paid out
$3.7128 on 20 Dec (ex)
$3.2655 on 17 Jun (ex)

If you bought say start of year at ~$55 you've got 12.5% yield (and 25% capital gain).

Meanwhile the share price of PPX is still languishing at 90% below their 2007 peak.

It may be possible to play this arbitrage - buy PXUPA and short PPX. But not sure you can easily short PPX and you are toasted if they get a takeover or something like that.


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## prawn_86 (10 February 2011)

After help from SKC, Calliope and Bill and my own research i think i'm going to have a dabble and buy some AAZPB.

Currently paying >10% yield, quarterly distributions. And potential of an approx 7% gain if they decide to buy them back if IR continue higher. Anything i've missed?


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## awg (10 February 2011)

Hi prawn,

I strongly agree fiig as a resource...absolute must..I think you in particular will see the usefulness

They have a buy on MXUPA

good coupon, running yield 11%,  25% cap gain on possible conversion

This is my biggest hybrid holding

negative is non-cumulative, discretionary distribution

but backed by Brookfield, so this is deemed to be very unlikely

these type get crunched in GFCs tho, went down to $13  ($100 issuance)


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## prawn_86 (10 February 2011)

Yeh signed up to FIIG yesterday and got their sheet.

So many options, wish i had more cash to allocate...


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## sinner (10 February 2011)

awg said:


> these type get crunched in GFCs tho, went down to $13  ($100 issuance)




Long USTs (or JGBs)+Long Aussie hybrids?

Might smooth the curve a little.


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## boofhead (10 February 2011)

PXUPA seems to have rallied a bit since the announcement of resumption of payments.

PPX losses have been much reduced. FIIG sometime this year in their weekly The Wire had a bit of a writeup about changes in financial position and their recent staff reductions.

That said PPX are still making losses at last report.

BTW, FIIG is definately worth the effort for those that want to read up about hybrids. I got the phone call when I went through their web signup and made it clear I wasn't interested in buying anything through them - only reading their research and person on the phone seemed ok with that.


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## prawn_86 (11 February 2011)

hmm, i've whittled it down to 2 at this stage which suit my risk profile for my 1st hybrid investment.

AAZPA or MXUPA. Both seem much of a muchness to me, but i guess MXUPA has more capital gain upside (which means the market doesnt currently like it as much...)

Might just flip a coin as i only want to buy one at this stage


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## fj20det (18 February 2011)

*Re: GNSPA -  Hybrid Securities*

'The Directors expect to either convert the FORESTS to ordinary equity or undertake an on or off market purchase of the FORESTS at or around the then current market price following completion of restructuring and refinancing transactions. The transactions are expected to be finalised in the first quarter of the 2012 calendar year.' (source: Gunns Director's Report 15 Feb 11)

I thought the only options Gunns Directors had was to convert GNSPA to GNS shares at $102 or to cash out at $100 face value. While the Directors can always purchase on-market or make an off-market offer, surely GNSPA holders are not bound to accept such offers 'at current market prices' if they represent reduced value. What happens to the rump of GNSPA holders who hold out for the full $100/$102 conversion?


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## prawn_86 (21 February 2011)

So how will this new deal between Seven and WAN effect the notes? Will they be bought back or stay active?


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## Bill M (21 February 2011)

I don't think anything will change with SVWPA (TELYS4).

I also don't think they will get bought back in May 2011 but they do have a right to buy back at any dividend time. It seems business as usual.


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## ricee007 (11 March 2011)

Anyone have any opinion on whether or not recent Bell Bay approval is goood, or bad, for GNSPA holders?


----------



## Calliope (11 March 2011)

ricee007 said:


> Anyone have any opinion on whether or not recent Bell Bay approval is goood, or bad, for GNSPA holders?




It depends on the level of risk you are prepared to accept. The vast array of left wing protesters worries me, and will make capital backers difficult to secure.


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## ricee007 (11 March 2011)

Calliope said:


> It depends on the level of risk you are prepared to accept. The vast array of left wing protesters worries me, and will make capital backers difficult to secure.



 Let me rephrase.

Does anyone have any thoughts on whether or not building the Bell Bay pulp mill, will be good for GNSPA holders or not?


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## ricee007 (11 March 2011)

I mean, today,

volume of 9 trades. lost 0.5%

BUT, did trade +$3.70 above its closing price today....


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## prawn_86 (15 April 2011)

MXUPA looking to break out if it can close where it is now. Will be a yearly high, albeit on low volume


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## ricee007 (15 April 2011)

prawn_86 said:


> MXUPA looking to break out if it can close where it is now. Will be a yearly high, albeit on low volume



 Yea, do you understand why? I don't.

I mean, I'm happy with my modest holding of 35 MXUPA... but I don't understand the last few green days.


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## tome (19 April 2011)

Would love to find out the highest dividend/coupon paying hybrid asset out there?  Anyone aware were to find a complete list?


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## Calliope (20 April 2011)

tome said:


> Would love to find out the highest dividend/coupon paying hybrid asset out there?  Anyone aware were to find a complete list?




Try FIIG. I suppose that you are aware that the higher the dividend, the higher the risk.
FIIG rates them according to risk.


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## Reasons (20 April 2011)

Bill M said:


> Bought some more CBAPA today on a down spike. Someone had to offload in a hurry, they sold cheap. Bought at $207.50, watch where it will be in 2 Months time.




Hi Bill, only just found this thread. I bought some CBAPA probably around the same time as you in Feb. I am interested in your logic as to their likely price increase? Thanks.


----------



## boofhead (20 April 2011)

Since Feb the market interest rates have been subdued - even slightly weakening. Check www.afma.com.au for the rates for the previous day. With rates increases I would have expected CBAPA to slightly increase. http://www.macquarie.com.au/codi/eqdh_start.htm also has some information in easy to find tables.


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## Bill M (20 April 2011)

Reasons said:


> Hi Bill, only just found this thread. I bought some CBAPA probably around the same time as you in Feb. I am interested in your logic as to their likely price increase? Thanks.




Too late to sell now as it's just gone ex dividend. The logic behind it is that hybrids tend to run up quite well as they approach their ex dividend date. At the last quater this stock got up to $214.50, this time it got to around $211. Sometimes the run up is much higher than warranted, this time it was lower. The idea was to see it run up to $214 again and sell it. I have capital losses from the GFC and the capital gains I would have made would therefore have been tax free.

This time it just didn't run up as hard and I did not sell. The dividend is what I originally bought it for so unless the capital gains are worthwhile I will continue to hold, hope that helps.


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## ricee007 (20 April 2011)

tome said:


> Would love to find out the highest dividend/coupon paying hybrid asset out there?  Anyone aware were to find a complete list?




http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc might be of assistance to you?


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## Reasons (20 April 2011)

Bill M said:


> Too late to sell now as it's just gone ex dividend. The logic behind it is that hybrids tend to run up quite well as they approach their ex dividend date. At the last quater this stock got up to $214.50, this time it got to around $211. Sometimes the run up is much higher than warranted, this time it was lower. The idea was to see it run up to $214 again and sell it. I have capital losses from the GFC and the capital gains I would have made would therefore have been tax free.
> 
> This time it just didn't run up as hard and I did not sell. The dividend is what I originally bought it for so unless the capital gains are worthwhile I will continue to hold, hope that helps.




I do hold several hybrids at present and decided to see what this would do on ex-div. I am still on the right side of it at present, but hindsight says it was probably the less smart move. 

It is interesting how well most are holding though ex-div at present in bumpy market conditions. I am getting a severely itchy trigger finger on GMPPA.

CBAPA still has a few years to run before conversion and grossed up at ~8% is still not too bad at ~$207. I was just interested to see how you were thinking about it (possible secret formulae and all that ) Thanks.


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## Bill M (20 April 2011)

Reasons said:


> It is interesting how well most are holding though ex-div at present in bumpy market conditions. I am getting a severely itchy trigger finger on GMPPA.




I own this one, bought the float at $100 ouch However topped up when it was around $46. My average buying price is $93. It went down to $9 during the GFC, people thought Goodman was going fold, imagine if you bought it at that? GMPPA never missed an interest payment, so much doom and gloom was built into this one, it was over done.

If you want to look at a perpetual note right now check out SBKHB. I own these too, at todays price it's unfranked interest is around 8% as well.


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## Reasons (21 April 2011)

Bill M said:


> I own this one, bought the float at $100 ouch However topped up when it was around $46. My average buying price is $93. It went down to $9 during the GFC, people thought Goodman was going fold, imagine if you bought it at that? GMPPA never missed an interest payment, so much doom and gloom was built into this one, it was over done.
> 
> If you want to look at a perpetual note right now check out SBKHB. I own these too, at todays price it's unfranked interest is around 8% as well.




Thanks for the lead, I did not have any of SUNs fixed products covered in my spreadsheet; and you are a lot braver than me holding on like you did during the big dipper. 

Out of interest, I don't know if it has been mentioned elsewhere, but Bell Potter also do a fairly good fixed interest summary like FIIG's 'The Wire' and the reports have a bit more detail in terms of BBSW, margins, dividend obligations, etc.

The prospectus on SBKHB is f'n hopeless I have decided. I know it is a 90 BBSW, 0.75% margin, pays interest so no franking credit. I can't see anything on their obligations should they ever choose to buy back - acknowledging they are perpetual?

SKBPB looks interesting and is paying well on a grossed up basis. Have only done the figures using Bell Potter data and not had time yet to read the undoubtedly well written prospectus.


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## Bill M (22 April 2011)

Reasons said:


> The prospectus on SBKHB is f'n hopeless I have decided. I know it is a 90 BBSW, 0.75% margin, pays interest so no franking credit. I can't see anything on their obligations should they ever choose to buy back - acknowledging they are perpetual?




I'm a little unsure if you could find the original prospectus or not. It was issued in the late 90's and had the ASX code SUNHB when listed. You could google that and I think you may find it. The name change happeneded recently, I can't recall anything changing from the old to new other than the name. I would say this will probably never get re purchased. Look at it this way, where else would Suncorp ever get such cheap funding now? No where, it is not in their interest to re purchase. Looking at this stock just as a buy on market and sell on market stock, the interest payment of roughly 8% at todays price looks good. I wonder why Comsec only offers 55% on the margin loan facility though? Risky? Suncorp? No quick capital gains here I think but not bad for interest maybe. The are better ones around, it's just getting a bit cheap right now, last price was $69.


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## awg (22 April 2011)

prawn_86 said:


> MXUPA looking to break out if it can close where it is now. Will be a yearly high, albeit on low volume




I accumulate on dips, now 3rd largest holding in my entire portfolio.
A bit mindful has occasional spreads and low liquidity 



Reasons said:


> Hi Bill, only just found this thread. I bought some CBAPA probably around the same time as you in Feb. I am interested in your logic as to their likely price increase? Thanks.




holding CBAPA.

out of interest, I read that a slight arb can be had on the FF hybrids after ex-date, as many buyers are OS ( therefore franking credits are irrelevant, ie not available to them).

I have observed this to generally be the case, but unfortunately, a largish trade carried across a few days would probably be needed to make it worthwhile, and I dont keep that sort of free cash reserve available, also havent analysed the data methodically enough to justify, as yet.

Every bit of capital appreciation I can squeeze out is a buffer, am relatively overweight in hybrids as bank interest rates are too meagre because I was consistently getting RIPPED OFF and mucked about as an SMSF with Corporate Trustee


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## ricee007 (22 April 2011)

Where do you get your MXUPA information on? It is hard for me to tell how risky they actually are, so I am not overweight in them... despite thinking that , at this price, it probably is a good idea.


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## Reasons (23 April 2011)

ricee007 said:


> Where do you get your MXUPA information on? It is hard for me to tell how risky they actually are, so I am not overweight in them... despite thinking that , at this price, it probably is a good idea.




They haven't made it easy to find - the original 2004 prospectus can be found here...
http://brookfield.eprospect.com.au/pdf/pds/sites.pdf

They are highly speculative like ELDPA on the basis of poor interest cover and a perceived dodgy balance sheet.


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## Bill M (23 April 2011)

awg said:


> holding CBAPA.
> 
> out of interest, I read that a slight arb can be had on the FF hybrids after ex-date, as many buyers are OS ( therefore franking credits are irrelevant, ie not available to them).
> 
> I have observed this to generally be the case, but unfortunately, a largish trade carried across a few days would probably be needed to make it worthwhile, and I dont keep that sort of free cash reserve available, also havent analysed the data methodically enough to justify, as yet.



Are you suggesting that they tend to dump a bit harder than necessary? I am not too sure what you mean. I would sell them at the right price if the opportunity arose. Any info on this "arb" would be helpful.

By the way SVWPA is going ex dividend soon. The price has run up to a high of $95.98, I was going to sell the next day but then it went down to $95.... I have to be patient. If it doesn't get to my sell price the divi will be nice.


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## ricee007 (24 April 2011)

Reasons said:


> They haven't made it easy to find - the original 2004 prospectus can be found here...
> http://brookfield.eprospect.com.au/pdf/pds/sites.pdf
> 
> They are highly speculative like ELDPA on the basis of poor interest cover and a perceived dodgy balance sheet.



Yea, but, I mean, where do you find up-to-date information? -> in the last 7 years, their balance sheet has greatly changed. I could tell you what the trust has for assets.... but I don't know how secure the distributions are into the future / when conversion is likely / etc.


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## Reasons (26 April 2011)

ricee007 said:


> Yea, but, I mean, where do you find up-to-date information? -> in the last 7 years, their balance sheet has greatly changed. I could tell you what the trust has for assets.... but I don't know how secure the distributions are into the future / when conversion is likely / etc.




This has all the up-to-date info under 'Related Links' on the right hand side...
http://www.au.brookfield.com/investment-platform/sites/2011-key-dates

It is perpetual, they stepped up on 22/2/2010 and applied a 2% step-up margin from 1/4/2010 to the 90BBSW so depending who you read, redemption seems unlikely as even at ~10.5% return general group-think has it they will consider it cheap money and are unlikely to seek redemption. 

The $450m raised through MXUPA was loaned to Brookfield Australia Property Trust, so the performance of BAPT is what you have to pay attention to.


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## ricee007 (26 April 2011)

Reasons said:


> This has all the up-to-date info under 'Related Links' on the right hand side...
> http://www.au.brookfield.com/investment-platform/sites/2011-key-dates



Ty 



> It is perpetual, they stepped up on 22/2/2010 and applied a 2% step-up margin from 1/4/2010 to the 90BBSW



Yep.



> so depending who you read, redemption seems unlikely as even at ~10.5% return general group-think has it they will consider it cheap money and are unlikely to seek redemption.
> 
> The $450m raised through MXUPA was loaned to Brookfield Australia Property Trust, so the performance of BAPT is what you have to pay attention to.



Cheers.

Hmm, I was of the opinion that the financial position of BAM was also important, and that BAM is quite well capitalised, and not *particularly* risky. Thus, they could get cheaper funding than 3.9% above BBSW.

However, I'm not entirely sure how grounded in reason my thoughts are.

Furthermore, continuing with the immediately preceding sentence, I figure if BBSW rises much higher (has dropped recently, I know), then they can get cheaper funding - that is “cheaper enough” to make it worth the while to go about the redemption process, and utilise that cheaper funding.

Now, interest rates are going up, short-medium term, so BBSW will go up short-medium term, so 3.9% above BBSW becomes more expensive, and redemption becomes more likely.

Also, if Brookfield Office Properties lists on the ASX http://www.businessspectator.com.au...listing-pd20110214-E2UFJ?opendocument&src=rss , sure it *DOES* show an intention to expand (less likely to want to pay back $450m of debt)… but also it gives them access to a significant amount of money (billions?) (more likely to pay back $450m). Having said that, theoretically, hybrids are cheaper than equity… so might as well raise less equity and keep hybrids out, potentially?

Also, I’m not quite sure how inter-related BOP is with MXUPA. It is a very complex organizational structure of related entities and associates.

Another consideration is, at $80, I would have thought this would be right up the ally of someone like Brookfield Asset Management (the BAM that I mentioned earlier), either by itself, or through a related entity. I mean, at $80, from the (albeit limited) information that I have, it seems quite decent? – whether that be through an on, or off market buy back or just BAM buying on-market for itself.

http://investing.businessweek.com/b...tocks/private/snapshot.asp?privcapId=53340342 is all 12 months old, but all seems rosy…. And property values have only increased in the last 12 months? Financial results for FY 2011 will be, obviously, as always, crucial… but even merely matching last year should be considered good news?

Management seems smart enough?

At the end of the day, 4.9+3.9 = $8.8.
@ $80, 100/80 = 1.25.
1.25*8.8 = 11%.

I purchased my current lot at under $80. I’m laughing all the way to the bank at the moment, and not too upset whether or not these are redeemed short-medium term or not. My holdings aren’t vast… but I do enjoy seeing the dividends trickle into my account, next to my GNSPA, quarterly. I do regret selling FXJPB @ $90 though. 

And, in conclusion, I still can’t form a confident opinion on the likelihood of redemption of these (but don’t reallllly care, as nothing indicates to me that the trust will be unable to pay a dividend). It would appear to me to be a good buy @ $80+, but, I don’t quite back my judgment enough to double my holdings. 

Looking at WOWHB, $99.9, 1.1%.... surely will stepup to 3.1% September 2011. Thus, it would seem that WOWHB would need to pay around 3.1% above BBSW to get funding.

BAPT is obviously more risky. However, hybrids are more expensive than debt. It would really depend on a number of factors, which I can’t take into account accurately… but ALE Notes 2 fairly recently listed at a 4% above, so if WOWHB is around 3.1%, and ALE Notes 2 are around 4%....It seems weird to me that BAPT is seen as THAT much riskier that it is, effectively, at 11-4.9 = 6.1% above BBSW.

ALE at less than 4% above (trading at $102), WOWHB effectively at circa 3.1% above, AAZPB at, effectively, 5.2% above…. Etc…. and MXUPA (BAPT) at effectively 6.1% above…..

Okay, so MXUPA is closer to $82 than $80, and BBSW isn’t exactly 4.9%, and the different time-line of when things mature will be important, and the ‘risk’ that Woolworths will redeem wowhb, etc…. but, you get the point. MXUPA at $80 and 3.9% above seems expensive to me.


However, take all of the amateur talk above with a large pinch of salt, because, as I've aptly proven, I have no clue.


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## ricee007 (28 April 2011)

There you go, MXUPA up $5 in the last 2 days.

Even if it makes it to $90.90, that is still:
4.9+3.9 = 8.8 *1.1 = 9.7%...*AND* with the 10% potential upside when it gets redeemed....

So, I won't be selling into this strength... I wonder what casued this strength tho? 

Still has: 29 buyers for 8,240 units 
10 sellers for 4,816 units

$162,000 traded today

Up 3.6% (to $86.43) today, but was up to $87.96 earlier today....


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## prawn_86 (28 April 2011)

Yeh im up about 12% on unrealised capital gains and also get about 11.5% pa in divvies. More than happy holding with that yeild


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## Reasons (28 April 2011)

ricee007 said:


> There you go, MXUPA up $5 in the last 2 days.
> 
> Even if it makes it to $90.90, that is still:
> 4.9+3.9 = 8.8 *1.1 = 9.7%...*AND* with the 10% potential upside when it gets redeemed....
> ...




A few seemed to get more active on the higher than expected CPI figures and the associated chance of the BBSW being increased; and just as likely someone has put a buy on them accordingly.


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## Bill M (9 May 2011)

Bill M said:


> SVWPA creeping up as I thought they would. When they converted people were selling at $85, gee I love doom and gloom. Today finished up at $93.40.




This ones in the bag, sold today at $96.09. It goes ex dividend tomorrow I think.

Bought at average price of $88.58. Capital gains of 8.3% plus about 8% dividend yield all the way through. Time held, about 2 years.

Reasons for selling:
1. Good capital gains for which I will pay no tax as I have losses to offset it with.
2. At ex dividend the price will drop about $4.
3. They are still perpetual and may not convert, better take the money and run.

All in all I was happy with this one. Now if the price falls more than $4 when it goes ex dividend I might buy them back, what's next?


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## YELNATS (9 May 2011)

Bill M said:


> This ones in the bag, sold today at $96.09. It goes ex dividend tomorrow I think.
> 
> All in all I was happy with this one. Now if the price falls more than $4 when it goes ex dividend I might buy them back, what's next?




Bought in at $85.803 average. Happy to continue to hold SVWPA and get the $2.4154 dividend on May 31. If it drops $4 will probably top up, as seems a good long term hold.


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## Bill M (9 May 2011)

YELNATS said:


> Bought in at $85.803 average. Happy to continue to hold SVWPA and get the $2.4154 dividend on May 31. If it drops $4 will probably top up, as seems a good long term hold.



That divi is actually $3.49 according to the 5th May announcement, definitely very good.


----------



## YELNATS (9 May 2011)

Bill M said:


> That divi is actually $3.49 according to the 5th May announcement, definitely very good.




Sorry, you're right, I was mistakenly looking at the May 2010 dividend. After 100% franking credit for a SMSF in pension phase, this equates to nearly $5. Not too bad at all.


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## skc (13 May 2011)

skc said:


> Looked at these some time ago but didn't pull the trigger...
> 
> According to Iress the last 2 dividends were paid out
> $3.7128 on 20 Dec (ex)
> ...




Big plunge today on PPX and PXUPA. You can now buy PXUPA for ~$43 or yeild is (in theory) 15%... 

How did my theoretical arbitrage go in 6 months?

PPX        Short    Entry = 42c       Exit = 20.5c                                Change = +51%
PXUPA    Long     Entry = $63.50   Exit = $43 today + $3.71 dividend    Change = -26.4%

Net change 25%. Would have been an awesome trade...

Or if one was to take profit on the openning price, that's even better at 42%.

Too bad it was just on paper (punt intended).


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## ricee007 (26 May 2011)

I would have thought the sigh of relief that GNSPA holders heaved when GNS affirmed that it was paying a dividend would have pushed GNSPA back up to $75.

I just think at $67 that it is ridiculously cheap.

On another note,

I keep checking out the price of non-Big 4 financial institution hybrids... but even with the recent ASX falls, no true bargains have popped out at me... some 'good value', but nothing that screams 'sell your first born and buy now'. Anyone feel the same way?

BENHB paying $1.44, but dropping $4... whilst BEN raised was very interesting.

BUT, at $75 (last 75.5, bid 75, offer 76)........ it is paying 6% on $100... 6*1.3333333 = 8%. So, only about 8%.

At 1% margin, Bendigo has no reason to 'ever' redeem these... but, to make it worth while, I'd probably want more like 10% = BENHB @ $60.

Again, this means that BENHB = 'value' ( @ 8%)... but not 'oh I need to buy now (10%)...

Same analysis on MBLHB, but paying slightly higher.


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## Huskar (1 June 2011)

ricee007 said:


> I would have thought the sigh of relief that GNSPA holders heaved when GNS affirmed that it was paying a dividend would have pushed GNSPA back up to $75.




Just to confirm, if GNS (or for that matter PPX) said it would not pay the dividend on its common stock, does this also mean it would suspend payments on its hybrids? 

Apologies - a bit new to hybrids but fascinated.


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## ricee007 (1 June 2011)

Huskar said:


> Just to confirm, if GNS (or for that matter PPX) said it would not pay the dividend on its common stock, does this also mean it would suspend payments on its hybrids?
> 
> Apologies - a bit new to hybrids but fascinated.



No, no it does  not mean that.

Generally (I haven't checked PUXPA's, and I can't guarantee what GNSPA says, but, generally), if you DON'T pay interest on the hybrids, you CAN'T pay dividends to ordinary shareholders. However, it doesn't work in reverse.

Case in point: GNS last paid a dividend 2009... yet have not missed a GNSPA payment.

In other news, GNS up 27%, GNSPA barely up.

If GNS sells a couple of hundred million in assets, *and* the market doesn't disapprove of the price, and I have sufficient cash flow, I'll prob buy more GNSPA


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## Bill M (8 August 2011)

Bill M said:


> This ones in the bag, sold today at $96.09. It goes ex dividend tomorrow I think.




Repurchased SVWPA today at $86.30, gee I love doom and gloom. At this price it's a 12% gross yield.


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## Calliope (8 August 2011)

Bill M said:


> Repurchased SVWPA today at $86.30, gee I love doom and gloom. At this price it's a 12% gross yield.




A courageous buy.

I was tempted to buy AAZPB at $85.50 during the dead cat bounce this morning, then I remembered that during the GFC they dipped to $32... so I was soon disabused of that idea.


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## YELNATS (8 August 2011)

Bill M said:


> Repurchased SVWPA today at $86.30, gee I love doom and gloom. At this price it's a 12% gross yield.




They finished at $85.03. I feel a bit more secure with SVWPA than AAZPB, given the differences in volatility of their two industries.

Disclosure: I hold SVWPA and not AAZPB.


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## ricee007 (8 August 2011)

Was an inch away from buying MBLHB....

But, then I realised... even at $66.66 it's yield is 10%.

That is bank territory.

EG: WBC went down to a low of $18.80, which, at a continued $1.50 divi, = 7.98% yield.... add franking credits and you are left with 11.4%.

11.4% with WBC v 10% with MBLHB.

Oh, and, that ignores other dividend stocks like Telstra.... or the ability to buy BHP/FMG 'cheap'.

Having said that, MBLHB did go green by over 1% today.... there is definitely potential capital gain, right up to (and past) $80.


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## ricee007 (23 September 2011)

Howdy,

I *desperately, desperately, desperately, would appreciate a hand*

MacBank had a list of Hybrids (primarily Convertible Preference Shares) on their website recently, (page title: CODI)... they recently took it away (perhaps you now need to pay?).
ComSec have had a similar list.... but I've never been able to find it, and I assume its only fo the big boys.

I really, really, really would LOVE a list of all hybrids/CPS on the ASX at the moment.

Would reallllly love.


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## Bill M (23 September 2011)

It's not as good as Macquarie but the ASX one is a reasonable guide.

Above the heading of "Hybrid Securities" you also have the links to Corporate bonds, floating rate notes and convertible notes.

Here is the link:

http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=HYBRID

I'm looking at SVWPA again today.


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## ricee007 (24 September 2011)

Bill M said:


> It's not as good as Macquarie but the ASX one is a reasonable guide.
> 
> Above the heading of "Hybrid Securities" you also have the links to Corporate bonds, floating rate notes and convertible notes.
> 
> ...




That is very helpful.

If anyone can find a more complete one, it'd still be appreciatd. I need to do a presentation by Tuesday.... but my most important (and possibly hardest?) unii assignment in the last 5 years is due Monday afternoon.

FML.


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## boofhead (24 September 2011)

Contact www.fiig.com.au Monday. Not sure about generally free, anonymous lists though.


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## kid hustlr (18 October 2011)

Great thread this one.

Just thought I'd bump it and put a different spin on things. Obviously with the WOW offer out today there might be some hybrid security thoughts going around.

Does anyone use these as a replacemtn to say investing in Term Deposits? I'm talking mainly the big hybrids with VERY little risk of default like anz/cba/nab/wow etc etc. 

I know there's always some level of uncertainty within the markets and every investment goal is different but if one was going to lock up a decent portion of their capital for a an extended period of time they might want to consider these investments over say a 6% TD with the cba?


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## ricee007 (18 October 2011)

kid hustlr said:


> Great thread this one.
> 
> Just thought I'd bump it and put a different spin on things. Obviously with the WOW offer out today there might be some hybrid security thoughts going around.
> 
> ...



 Yea, I've considered it.

But, I've stuck with holding risky Hybrids.

GNSPA 15% profit + interest
FXJPB ~5% profit + interest
BEPPA 35% profit
MXUPA 1% loss + Interest

And they seem to have worked out quite well for me so far.

When I'm older (I'm still @ Uni), i fully intend to use safer CPS... At the moment, the circa 8.5% yield I can get is not enough. I'd rather cash for its pure instant liquidity and shares (for what I know best).


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## ricee007 (18 October 2011)

Oh, another thing that I forgot about - Remember CPA had a PERLS drop from $200 to $125 through GFC. Sure, this dropped was only a little bit over half what the Ordinaries dropped.... but, it's still very significant. They are trading at circa $178 now... so, still a 10% drop from when they were issued. (IIRC this is PERLS III, but, don't hold me to that).

Some Hybrids through the GFC were just utterly 100% ridiculously cheap. It was just madness.


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## Calliope (18 October 2011)

I am at present buying more IMFG (IMF 10.25% Convertible Notes). They pay 10.25% on the issue price of $1.65 Their present price is $1.67. I would say they are low to medium risk.


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## kid hustlr (18 October 2011)

yeah i mean obviously theres a chance of a capital loss if you all of a sudden need to sell them during a time of panic.

I guess I'm not looking to compare the highly rated hybrids to the lower rated hybrids but more compare higher rated hybrids with money in a TD. I  mean if liquidity isnt an issue for you right now I feel the 8% given by a anzpa type security is just soooo much more appealing than what you can get in the bank. What are the realistic chances a major banking institution in Australia goes belly up?

Hindsight is 20/20 in regards to the GFC though, those hybrids look cheap as chips now but back then there was genuine concern/fear that these companies wouldnt be able to pay.

Anyone have any thoughts on the woolies hybrid? mark up looks pretty good and there were no major holes in the terms that I could see.


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## ricee007 (18 October 2011)

Not quite sure if the WOW Notes really count as Hybrids, being unable to convert into Ordinary shares... but. Again, they seem fine, a touch lower than I would have thought (so, I expect the margin to be closer to 3.5 than 3.25).....but, they don't fit with my investment goals (10%). I do like the fact taht they step up after around 5 years. 4.5% above the BBSW is probably quite expensive.

If the market over-reacts to any news, and these drop to $95 or so, I'd probably jump over these like a rash.

The 8%+ that you can get from a bank is tempting. I would not use a TD, I would use that. In fact, I'd probably go so far and buy the riskiest safe bank I could, to try to get more like 8.6% - as opposed to 8.1%. I think our 'riskier banks' (BEN, BOQ, ETC) are still safe enough for me.

However, I am happy with some cash, but very most of my 'assets' in shares (inc. risky CPS).

IIRC, MQG have a note paying something like 10.25% on face value, but they are trading at a 4% premium. IIRC they only have a couple of years till maturity, so the YTM is under 10% p.a.

My aim is more than 10%, but they are the sort of thing I would snap up. In fact, if I could get >10% YTM on a MacBank security, I would buy it.


----------



## ricee007 (19 October 2011)

Any thoughts on MXUPA?

It just seems stuck in the $72.5-$77.5 range.

I can't see why it can't shove to and past $80, to be honest.

I would have thought the rumours of an upcoming redemption probably would have been enough - let alone the actual risk/dividend analysis.

MXUPA is probably the asset I'm most comfortable holding. 3.9% + 4.75%.... I'd buy it at $85 - > 10% yield, with a chance of 25% gain on redemption.

GNSPA is up another 10%. Remeber, it was just two weeks ago that you could purchase it for $32.xx.

Now its $61 + ex-div of $2.65....

So, effectively, increased in price by over $30 - over 100% in two weeks.

Who says you can't make money from Hybrids? Who says hybrids are boring .


----------



## prawn_86 (19 October 2011)

I hold MXUPA and am quite comfortable with it. Would def top up at these prices if i needed to increase my allocation


----------



## ricee007 (24 October 2011)

Glad that GNSPA has done so well lately. Thought about getting out, and jumping in front of the $70 seller...

But, then I realise that it doesn't appear that GNS is buying GNSPA on-market yet, as they alluded that they might.

If this is how it's going to react, before GNS even start buying on-market, what will happen when GNS start buying on-market, or a pulp mill financer comes to the party?


----------



## Julia (28 December 2011)

ASIC is sounding a clear caution on hybrids.  Item on last night's "7.30" is worth watching for fans of these instruments.

http://www.abc.net.au/7.30/content/2011/s3398644.htm


----------



## reeftip (28 December 2011)

Julia said:


> ASIC is sounding a clear caution on hybrids.  Item on last night's "7.30" is worth watching for fans of these instruments.
> 
> http://www.abc.net.au/7.30/content/2011/s3398644.htm




Thanks for the link to this story Julia.

I am glad that I never touched them.


----------



## So_Cynical (28 December 2011)

Julia said:


> ASIC is sounding a clear caution on hybrids.  Item on last night's "7.30" is worth watching for fans of these instruments.
> 
> http://www.abc.net.au/7.30/content/2011/s3398644.htm




What a shonkey story...unusual for the 7.30 report to do a beat up story, the risks are spelled out in the prospectus, buyer beware.


----------



## Bill M (28 December 2011)

Julia said:


> ASIC is sounding a clear caution on hybrids.  Item on last night's "7.30" is worth watching for fans of these instruments.
> 
> http://www.abc.net.au/7.30/content/2011/s3398644.htm




Whilst the story certainly gave warnings of what can go wrong it failed to highlight some of the positives. Not all hybrids are the same and as So Cynical says, it's all up front and in the prospectus. Shareholders nearly always rank lower than hybrid holders and in most cases if interest payments are stopped for any reason then no dividends are paid on fully paid Ordinary shares either (That is the case for most hybrids). Then there are hybrids that pay cumulative interest payments. What that means is that if for any reason payments stop then the payments that should have been made accumulate and eventually must be paid to the holder. Whilst those payments are withheld ordinary shareholders get nothing.

As with any other investments, there are no guarantees. None of the hybrids I know of are guaranteed. When a conservative investor is contemplating buying a hybrid there is one very important question for that investor to ask his broker, "is the issue 100% guaranteed"? A broker would have to advise that they are not (usually) in which case they shouldn't buy them if they are that concerned.

The only guarantees right now are the federal government bank ones for money deposited in banks. You can be super safe and get low interest on your money (in the bank deposits) or can you take AA rated risks and double the interest received by buying bank hybrids. Each to his own and as always mentioned everyone_* must read the relevant prospectuses.*_

I might also add that the hybrids and floating rate notes that I held through the GFC all kept on paying the interest/dividends throughout, unlike a lot ordinary stocks at the time. Hybrids can be a good source of income, SVWPA is looking good again.


----------



## Julia (28 December 2011)

Bill, I understand all you're saying.  I've never used hybrids.
I was aware of the capacity of the interest to be suspended but hadn't really thought about the capital risks so much, and was quite taken aback at how much the featured "sophisticated investor" had lost on his Paperlinx hybrids.

He lost more than $300K just via this one company.  One would have to hope it was still just a relatively small proportion of his invested capital.

SC, care to make a guess about how many investors buying hybrids would actually read all the fine print?  Not many would be my guess.
So I don't regard the 7.30 report as a beat up at all.  Have a read of the Storm Financial thread and you'll see how people fall for anything.


----------



## Calliope (28 December 2011)

Julia said:


> ... and was quite taken aback at how much the featured "sophisticated investor" had lost on his Paperlinx hybrids.




I am am an "unsophisticated investor", but I knew enough to be wary of Paperlinx and Elders, and Gunns too for that matter. The "sophisticated investor" bought Paperlinx because they were cheap. Not very smart. The Nigerians will be after him.


----------



## kid hustlr (29 December 2011)

Thanks for posting that Julia.

Bottom line however is that its definitely up to the investor to do the research. These hybrids/convertibles etc can have all kinds of clauses and exceptions however and you need a pretty good understanding of the terms to invest comfortably.

What does nulla nulla always say,

'as always do your own research'


----------



## Julia (29 December 2011)

So_Cynical said:


> What a shonkey story...unusual for the 7.30 report to do a beat up story, the risks are spelled out in the prospectus, buyer beware.



 ASIC can't win, can they!   They're constantly criticised for not being sufficiently protective toward investors, and now they make an attempt to draw attention to the risks involved in hybrids and they - along with the ABC apparently - are engaged in a beat-up!

Of course potential investors should take responsibility and research any investment thoroughly.  But many don't.  So how about giving ASIC a break for actually trying to be helpful.


----------



## RandR (29 December 2011)

Julia said:


> ASIC can't win, can they!   They're constantly criticised for not being sufficiently protective toward investors, and now they make an attempt to draw attention to the risks involved in hybrids and they - along with the ABC apparently - are engaged in a beat-up!
> 
> Of course potential investors should take responsibility and research any investment thoroughly.  But many don't.  So how about giving ASIC a break for actually trying to be helpful.




I understand your reservations towards hybrids julia,  they are NOT for any unsophisticated investor imo. They do have there place as part of a fixed income portfolio, but only a small part of that imo.

However, I must agree with So Cynical on the story ...

Honestly, Paperlinx is not an investment I personally would put 50c into .. let alone $300,000. What the hell is a 'self styled' sophisticated investor doing putting $300,000 of his hard earned into a single company that has not been performing pretty horribly financially. (he would have been attracted at by a high yield, high because of the significant risk of it not being paid)

The story is a bit of a beat up, the vast majority of hybrids are fine. (as part of a diversified fixed interest portfolio)


----------



## awg (29 December 2011)

Bill M said:


> Whilst the story certainly gave warnings of what can go wrong it failed to highlight some of the positives. Not all hybrids are the same and as So Cynical says, it's all up front and in the prospectus. Shareholders nearly always rank lower than hybrid holders and in most cases if interest payments are stopped for any reason then no dividends are paid on fully paid Ordinary shares either (That is the case for most hybrids). Then there are hybrids that pay cumulative interest payments. What that means is that if for any reason payments stop then the payments that should have been made accumulate and eventually must be paid to the holder. Whilst those payments are withheld ordinary shareholders get nothing.
> .




Yes I was surprised the ABC didnt add a little rejoinder similar to above, so more like Today Tonite imo

Nearly all the major banks are cumulative preference, meaning the bank can never pay a div, until all missed pref share divs are paid. If you think banks are going to fall over, dont invest.

In addition, imo, they failed to make it clear Mr Sophist was clearly SPECULATING for capital gain, as much as income.

I agree it should be highlighted that they all have a different risk profile.

Somewhere back here I mull over why Gunns Hybrid was too risky for me, even though it required head SP to fall over 50%, well that did happen, not sure how GNSPA is going.

I suppose unless the media cover, peeps wont check
Up day for many hybrids today


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## So_Cynical (29 December 2011)

RandR said:


> However, I must agree with So Cynical on the story ...
> 
> Honestly, Paperlinx is not an investment I personally would put 50c into .. let alone $300,000. What the hell is a 'self styled' sophisticated investor doing putting $300,000 of his hard earned into a single company that has not been performing pretty horribly financially. (he would have been attracted at by a high yield, high because of the significant risk of it not being paid)
> 
> The story is a bit of a beat up, the vast majority of hybrids are fine. (as part of a diversified fixed interest portfolio)




Exactly...this guy put 300K into Paperlinx and then classed himself as a sophisticated investor, dude seriously WTF  PPX were in trouble 2 and 3 years ago, writing clearly on the wall in big black texta.

90% of the Hybrids are great investments, but as is the case with ALL shares things can and do go wrong....and i suppose with Hybrids that risk is somewhat amplified because they are seen as an income/interest investment first and a preference share of some type second.


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## Calliope (29 December 2011)

Julia said:


> ASIC can't win, can they!   They're constantly criticised for not being sufficiently protective toward investors, and now they make an attempt to draw attention to the risks involved in hybrids and they - along with the ABC apparently - are engaged in a beat-up!.




"Protective towards investors?". The Nanny  State cannot protect fools from making bad investments, any more than it can protect them from killing themselves on the road, drowning themselves on the beaches or getting sucked into Nigerian get-rich scams.


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## Julia (29 December 2011)

Calliope said:


> "Protective towards investors?". The Nanny  State cannot protect fools from making bad investments, any more than it can protect them from killing themselves on the road, drowning themselves on the beaches or getting sucked into Nigerian get-rich scams.



 Oh for god's sake, I wish I'd never posted the link.  I've made no suggestion about the usefulness or otherwise of hybrids.  Just commented that ASIC seem to be attempting to be on the front foot for a change.

Of course the bloke who invested $300K in the Paperlinx hybrids was stupid.
Hopefully, however, the broadcasting of his experience might make a few people think twice before doing something similar.

Send your objections to ASIC and the ABC if you're so annoyed about the segment on "7.30".


----------



## skc (29 December 2011)

Julia said:


> Oh for god's sake, I wish I'd never posted the link.  I've made no suggestion about the usefulness or otherwise of hybrids.  Just commented that ASIC seem to be attempting to be on the front foot for a change.
> 
> Of course the bloke who invested $300K in the Paperlinx hybrids was stupid.
> Hopefully, however, the broadcasting of his experience might make a few people think twice before doing something similar.
> ...




This bloke also started this website...
http://www.paperlinx-sux.com/

A poor selection of font size and colour scheme is only surpassed by the lack of logic in most of his arguments (which in turn is surpassed by the crap grammer of this post).


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## Calliope (30 December 2011)

Julia said:


> Oh for god's sake, I wish I'd never posted the link.  I've made no suggestion about the usefulness or otherwise of hybrids.




Neither did I. My comment was about the intrusiveness and ineffectiveness of the Nanny State. I'm sorry that you saw this as a criticism of your input to the thread.


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## Bill M (21 March 2012)

What's going on here? No one has posted here for 3 Months! I know a lot of you invest in these securities.

For me, here is my run down. I have sold 50% of GMPPA due to the surge in price in the last 3 Months. I did this mostly to de risk as I had too many of them. There is speculation that at the end of this year they might be bought back. The punt is buying at $85 in order to get $100 back at year end.

SVWPA: Still holding and I am happily receiving 11 to 12% gross dividends. Price is stagnating.

CBAPA: Still holding all mine and happily collecting 7.8% gross dividends. Price steady and slightly above face value.

ANZPA: Got on these after ex dividend at $99. Similar dividend as above with a small capital gain to come when converted or paid out.

What about all the new notes and preference shares offered lately? Anyone take any up? The only one I put in for was the AGL Subordinated Notes. Not much risk of AGL going broke and the 8.2% gross dividend looks good. I hope I get my allocation.

Anyone else doing anything?


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## ricee007 (23 March 2012)

Still subscribed 

****ting bricks about GNSPA at the moment. I was very happy with them earlier, then put in a sell order at about $65 that *just* got missed.... but wasn't too fussed.

Then CHandler came, I thought about it, and was still happy..... but, now, I'm not sure.

I missed the AGL one. I would have considered that if I had seen it.

I'm still happy with MXUPA that is just plugging away nicely. I am about even as far as capital gains go (little bit ahead since I purchased, sold, purchased).

They are the only two that I have at the moment.


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## Bill M (24 March 2012)

ricee007 said:


> I missed the AGL one. I would have considered that if I had seen it.




Hi ricee, I think the AGL notes are open until March 27th. I note on Comsec and Westpac Broking that they still show that it is available to purchase through the broker allocation. Maybe your broker might have an allocation too. If that's not posible and you are an AGL customer you can log in on AGL's website and apply through there. Hope that helps.


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## ricee007 (25 March 2012)

Bill M said:


> Hi ricee, I think the AGL notes are open until March 27th. I note on Comsec and Westpac Broking that they still show that it is available to purchase through the broker allocation. Maybe your broker might have an allocation too. If that's not posible and you are an AGL customer you can log in on AGL's website and apply through there. Hope that helps.




Cheers.

I'll have a look into them.

Compare 8.2% with 6% from a bank.... and you gotta have a think about it.


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## Bill M (4 April 2012)

Bill M said:


> The only one I put in for was the AGL Subordinated Notes. Not much risk of AGL going broke and the 8.2% gross dividend looks good. I hope I get my allocation.




I got my full allocation. Who says there is no money around, AGL today announced that the offer successfully closed and that they raised $650 Million.


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## Stephen (28 July 2012)

Greetings from a first time poster. I know that the "hybirds" have some interesting clauses associated with them such as AGKHA's inability to get any CGT events which has some important taxation considerations in relation to that. I was also surprised when I read the WBCPC prospectus and saw the "holding period rule".  I was wondering if anyone else had looked at it and made sense of it. Whatever happened to the law introducing plain English contracts? The cost of getting advice based on that rule would probably cost more than the average investor would make with the dividends. Would a SMSF trustee be classed as an individual? Would the average person need to be concerned that they won't get the franking credits if they hold them for less than 90 days prior to dividend date?


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## Stephen (28 July 2012)

I found the answer to my question. The ATO provides the answer:

http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00313594.htm&page=11

I should have tweaked after I read a method by the ASX to gain dividends by holding instalment warrants for the quarter. I didn't realise that preference shares require that the shares need to be held "at risk" for 90 days. Its a pity the lawyers who wrote the tax statement for the WBCPC prospectus didn't make it as clear as it should have been. The reason I found this out was I noted that IANG had a similar but better worded caveat.


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## prawn_86 (12 September 2012)

Apparently CBA just released a new issue of hybrids and they are the first Basel III compliant ones in Australia. Any members have any thoughts on them?


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## McLovin (12 September 2012)

prawn_86 said:


> Apparently CBA just released a new issue of hybrids and they are the first Basel III compliant ones in Australia. Any members have any thoughts on them?




They're still cr@p. Equity risk, debt return. No wonder companies love them, they get to issue equity for the cost of debt.


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## prawn_86 (19 September 2012)

OUt of interest does anyone know the highest yeilding hybrid on the ASX at the moment? Purely looking at yeild, risk not an issue for the reason i need to know


----------



## qldfrog (20 September 2012)

I have some  HLNG	:HLNG NOTES 11.25% CN
not sure it is the highest but not a bad return since I bought them


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## prawn_86 (25 September 2012)

What are peoples thoughts on the new Suncorp and also Bendigo Bank offers out?


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## YELNATS (25 September 2012)

prawn_86 said:


> OUt of interest does anyone know the highest yeilding hybrid on the ASX at the moment? Purely looking at yeild, risk not an issue for the reason i need to know




I like SVWPA Seven Group Holdings TELYS4, current price $83.55, last two 6-monthly dividends total $6.69 plus fully franked equals a yield of 11.4% for a super fund in pension phase. Also due to pay another divi soon, by end-Nov. I topped up further last Friday.


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## Bill M (7 October 2012)

YELNATS said:


> I like SVWPA Seven Group Holdings TELYS4, current price $83.55, last two 6-monthly dividends total $6.69 plus fully franked equals a yield of 11.4% for a super fund in pension phase. Also due to pay another divi soon, by end-Nov. I topped up further last Friday.




I own these too and I am very happy with the dividend too.

On another note, I got a letter last week from Goodman. The meeting of PLUS (GMPPA) holders approved all resolutions. PLUS will now be referred to as "PLUS ll". The margin will increase to 3.90% (up from 1.90%) over the three month Bank Bill Swap Rate. I am very happy to be holding these and will quite happily accept the extra distributions.


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## ricee007 (14 October 2012)

prawn_86 said:


> What are peoples thoughts on the new Suncorp and also Bendigo Bank offers out?




I tend to agree with http://www.smh.com.au/money/hybrids-swing-in-favour-of-investors-20121005-274fa.html



> Suncorp CPS2 offers a higher margin than other bank convertibles with greater potential to mitigate losses in distressed times. From a value perspective, we'd still avoid it, but this is an interesting option for those buying bank shares for their high yields. It's also a huge improvement on past hybrid offers.



Though, if Bendigo & Adelaide Bank offer 5.5% above BBSW, I may get some (assuming we can find out the price before committing to purchase). Bookbuild is expected to show 5-5.5% margin (per http://www.theage.com.au/business/m...e-bank-joins-hybrid-party-20120924-26ghc.html ). Even if BBSW drops to 3%.... 8.5% per annum... drop $5k, get $425 a year... not bad. IIRC, BBSW is 3.19% at the moment?

So, at the moment, buying them now, selling them in a year at $100, 5.5% margin, would result in a pretty nice approximately $415 profit, after paying for brokerage.

HLNG at about a 10.7% yield looks fairly tasty to me?


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## ricee007 (14 October 2012)

Come to think of it, I am liking MXUPA.

Just viewed their latest financials (whoops, should have done it when they came out?)... Liabilities decreased from $3404.3Mn to $2903M -a greater than $500m reduction in just 6 months. Assets have dropped $298.2m in this time... but, as a MXUPA holder, I'm rather happy with that ratio!

Net profit attributable to Brookfield Australia Investemnt Group was $175.5M for the 6 months to 30 June 2012,

Margin is 3.9%... but trading at $76. Call BBSW at 3.19%, and you are looking at circa 9.3%...


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## prawn_86 (15 October 2012)

ricee007 said:


> Come to think of it, I am liking MXUPA.
> 
> Just viewed their latest financials (whoops, should have done it when they came out?)... Liabilities decreased from $3404.3Mn to $2903M -a greater than $500m reduction in just 6 months. Assets have dropped $298.2m in this time... but, as a MXUPA holder, I'm rather happy with that ratio!
> 
> ...




Yeh i hold some MXUPA and have been considering topping up with more. Much better than bank interest...

My only concern is that IR will continue to fall meaning yeild will continue to fall also (but will still be better than bank interest)


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## Toeknee (23 October 2012)

http://www.asic.gov.au/asic/asic.nsf/byheadline/11-270MR+ASIC+warns+consumers+about+hybrid+securities+and+notes?openDocument

http://www.asic.gov.au/asic/asic.nsf/byheadline/12-207MR+ASIC'S+hybrids+warning%3A+don't+be+dazzled%2C+be+wary+of+the+risks?openDocument

These links may come in handy - Sorry if repost.


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## ricee007 (12 November 2012)

MXUPA went to a 12 month high today, and ended 2c from that high, with a close of $79.50.

Which is nice because I last purchased at $78.70 on 31/12/2010...... so, two years later, $0.80 capital gain....

But, of course, had around 10-11% dividend yield on it 

Made $5.51 capital gain on these back in 2009, holding them for 6 weeks. Reckon is was only my second capital gain, so I am quite fond of these!


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## Bill M (31 January 2013)

Hello hybrid investors, how is it all going?

I got an email today from Westpac Online Investing advising that the Westpac Capital Notes Offer is coming Soon.

---

The Margin is expected to be in the range of 3.20% to 3.40% per annum (to be determined under the Bookbuild)

Distributions are expected to be fully franked.

Distributions are scheduled to be paid quarterly in arrear beginning on 8 June 2013.

More details at this link: https://onlineinvesting.westpac.com.au/Public/Trading/IPOs.aspx

---

Comparing it to similar products it will probably trade just above issue price. With current interest rates so low I think I will be participating in this offer. 

I also topped up on ANZPA this week as the price dropped slightly and a distribution is coming in February.

How is everyone going? What are you buying? Cheers.


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## prawn_86 (10 February 2013)

Not exactly a hybrid by strict definition, rather a listed interest security - AKY


Bought to my attention by Sydboy in the LT Investing thread. Does anyone have any further thoughts or opinions? Are they likely to return capital of that amount each half or was it a once off that is making the yeild look so good at the moment?


----------



## robusta (10 February 2013)

prawn_86 said:


> Not exactly a hybrid by strict definition, rather a listed interest security - AKY
> 
> 
> Bought to my attention by Sydboy in the LT Investing thread. Does anyone have any further thoughts or opinions? Are they likely to return capital of that amount each half or was it a once off that is making the yeild look so good at the moment?




I could be wrong but a glance at recent announcements looks like a lot of the yield is from capital return, AKY is trading at a small premium to NTA at the moment.


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## ROE (11 February 2013)

Bill M said:


> Hello hybrid investors, how is it all going?
> 
> I got an email today from Westpac Online Investing advising that the Westpac Capital Notes Offer is coming Soon.
> 
> ...




I join you on this one...I got too much cash sitting around at call for much less so 
I take a calculated risk if I need the cash I can sell the notes.....

with the rate environment next 6-12 months I dont expect this note to drop but probably increase as
we approach first payment date.

I am not a notes player but I like my cash at call get a bit more juice, waiting for the day a stock
dropped on my lap at a price I like


----------



## boofhead (11 February 2013)

The Westpac Capital Notes, WBCPD will have a margin of 3.2%. Seems all the majors can push their hybrid margin towards the bottom.


----------



## ROE (12 February 2013)

If people want more details analysis
http://www.morningstar.com.au/s/documents/WBCPD300113.pdf


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## ROE (13 February 2013)

Look like there is huge demand for The Westpac Capital Notes
it now close only a few days after it open...

cant be bad for the notes price once it floated


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## Bill M (13 February 2013)

ROE said:


> Look like there is huge demand for The Westpac Capital Notes
> it now close only a few days after it open...
> 
> cant be bad for the notes price once it floated




How do you know it has closed already? There is no mention of that on Commsec or Westpac Online Investing site. It appears as though those 2 are still taking applications, so what's the deal?

On the Westpac Online Investing site I put in for some yesterday, paid for it and my application was taken.

By the way, a similar offer is coming out with NAB, the new NAB CPS offer. I will get some of those for sure as I am a shareholder. Who said there is no money around? Plenty of cash going into these.


----------



## ROE (13 February 2013)

Bill M said:


> How do you know it has closed already? There is no mention of that on Commsec or Westpac Online Investing site. It appears as though those 2 are still taking applications, so what's the deal?
> 
> On the Westpac Online Investing site I put in for some yesterday, paid for it and my application was taken.
> 
> By the way, a similar offer is coming out with NAB, the new NAB CPS offer. I will get some of those for sure as I am a shareholder. Who said there is no money around? Plenty of cash going into these.




Still Open yesterday close today I cant apply for it on Comsec any more and westpac you just get the infor but no place to apply for it...


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## Bill M (13 February 2013)

ROE said:


> Still Open yesterday close today I cant apply for it on Comsec any more and westpac you just get the infor but no place to apply for it...




Oh ok, looks like I just got in and probably because I use them as a broker I got the broker allotment. The NAB one is coming up very soon, be ready for it, cheers.


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## TikoMike (19 February 2013)

Etrade applications are still open.


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## chops_a_must (25 February 2013)

ROE said:


> Look like there is huge demand for The Westpac Capital Notes
> it now close only a few days after it open...
> 
> cant be bad for the notes price once it floated




Still open for holders of WBC.

Anyone holding health scope notes? They're looking like very good performers.


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## Calliope (25 February 2013)

Transpacific Step Up Preference Securities (TPAPA) are looking good after a $2 rise today to $92. At this price they still offer a very attractive effective yield.

The distribution rate for the P/E 31st March will be 6.45% fully franked. This gives an effective yield of 7%.


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## prawn_86 (28 February 2013)

MXUPA up 6% today and jumping above $90 for the first time in over 5 years.

Any particualr reason for the move or just general low IR and good market sentiment?


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## Bill M (6 March 2013)

This looks interesting.

---
*Offer of Healthscope Subordinated Notes II – Coming Soon*


The Interest Rate for each interest period will be fixed until the Maturity Date at between 10.25% and 10.75% per annum, as determined under the Bookbuild.1

The Interest Rate cannot change as it is fixed. However, additional interest will accrue if interest payments are suspended or otherwise not paid when due.

Interest payments on Notes II are fixed rate payments payable quarterly in arrears and must be paid to Holders unless interest payments have been suspended.

*Any suspended interest payments are cumulative and compounding.*
Interest payments will be unfranked.
Notes II have a term of 5 years, with a maturity date of 25 March 2018.
The issue price is $100 per Note II. This is also the principal or face value per Note II.
Notes II are expected to trade under ASX code “HLNGA”.

https://onlineinvesting.westpac.com.au/Public/Trading/IPOs.aspx

---

I bolded the interesting part.

I got to read up on the prospectus first but it certainly looks interesting, cheers.


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## ROE (6 March 2013)

too risky  .. extremely high leverage business run by private equity ....
too much of a Chanel Nine story...

11% I reckon I can make that with naked put options on solid business with much less risk..


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## Bill M (7 March 2013)

ROE said:


> too risky  .. extremely high leverage business run by private equity ....
> too much of a Chanel Nine story...
> 
> 11% I reckon I can make that with naked put options on solid business with much less risk..




Thanks for that, you could be right. Other businesses can get funding for half that rate so there must be some risk involved here, cheers.


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## tech/a (7 March 2013)

Bill M said:


> Thanks for that, you could be right. Other businesses can get funding for half that rate so there must be some risk involved here, cheers.




So what's to stop paying through Ponzi!


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## boofhead (10 April 2013)

Suncorp today has announced intention to issue floating rate notes. They are to replace an existing hybrid. From one of the ASX anouncements "The Margin will be determined under the Bookbuild, and is expected to be in the range of 2.85% and 3.10% per annum.". The major issued hybrids this year announced margins at the bottom of their ranges which happened to be 3.10% or 3.20% from memory. Seems SUN is aiming to get smaller margin.


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## boofhead (18 April 2013)

SUN announced in the updated prospectus a margin of 2.85% - I'm interested to see how many find that appealing. I'm also surprised to see them announce a margin smaller than what some of the majors have managed.


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## chops_a_must (18 April 2013)

boofhead said:


> SUN announced in the updated prospectus a margin of 2.85% - I'm interested to see how many find that appealing. I'm also surprised to see them announce a margin smaller than what some of the majors have managed.




Why would anyone bother?


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## sydboy007 (19 April 2013)

I bought into AYF a couple of months ago.  For want of a better term they're a Hybrid LIC.

They invest in between 15-45 hybrids.

I like the simple diversity and the yield is quite good.  They pay 11.25c a share per qtr and average around 50% franking credits.  On a gross dividend basis they're offering around 7.5% yield which is pretty good in this environment.

Only issue I have is that they are not a large listing and you can go a few days without any trades occurring.  I do wish there were more opportunities like this, even more so along the lines of AKY which has invested in bonds.  The fund has a 5 year life span and they provide capital returns as various bonds mature.

Australia is so backwards in the interest securities space, and I fear with Basel III that a lot of bank hybrid issues are going to not be so good since first call dates will no longer get APRA approval unless they can get replacement funding at lower rates.  There will also no longer be step-up clauses so the banks will have little opportunity or incentive but to hold keep the hybrids till maturity.


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## boofhead (3 July 2013)

I missed it yesterday, ANZ has announced new notes with expected ASX code ANZPD. Expected margin between 3.4 and 3.6 over 180 day BBSW. I expect it to follow the trend of being at the bottom end of expectations.

Business Spectator also said they expect Westpac to announce their offering soon.


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## Nedzed (4 August 2013)

Newbie intro..

Thanks all posters for a very informative thread, including useful links and facts.

I hold hybrids inside and outside SMSF and am basically buy & hold. Bought MQCPA, WBCPB and ANZPA on issue, (MQCPA just redeemed - I chose cash out). Also entirely lost a trivial amount punted on BNBG at a few cents in the dollar.

Currently looking to park more in interest bearing securities rather than equities in the medium term hence renewed focus on hybrids and notes.

One idle question about RHCPA - doesn't RHC have the right to call on any payment date, and hence deliver a substantial capital loss to anyone buying at current levels >$104 ?


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## Nedzed (9 August 2013)

Presumably the answer re RHCPA is that funding at BB+4.85% would be hard to replace, and that they are expected to continue to need this funding for quite a few years yet. For RHCPA holders to be repaid face value in (say) 2014 would be a disappointment to them.


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## Bill M (9 April 2014)

New offer is out now, Suncorp CPS 3. I might buy some of these as I am an existing floating rate holder and can get in on the IPO. 

A similar stock with the same margin is ANZPD and today they are trading at $102.15. That could be an indication of where the price might go.

---
https://www.fool.com.au/2014/04/03/suncorp-group-ltds-convertible-preference-share-offer-what-you-need-to-know/

_The issue price for these convertible preference shares, referred to as CPS3, will be $100 each. The minimum investment is $5,000. CPS3 holders will receive dividend payments quarterly, starting on 17 June 2014.

The dividend payment will be based on the 90-day bank bill swap rate (BBSW) plus a 3.40% per annum margin rate, which was set in the bookbuild completed 1 April. The bank bill rate on the first business day of the relevant dividend period will be used for calculation. Dividends will be adjusted for Suncorp’s tax rate._
---


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## Julia (9 April 2014)

Bill, does this actually work out to be a higher yield than if you just bought SUN shares with usual dividend and franking credit?  The latter would be grossed up around 7.5%.


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## McLovin (9 April 2014)

Julia said:


> Bill, does this actually work out to be a higher yield than if you just bought SUN shares with usual dividend and franking credit?  The latter would be grossed up around 7.5%.




You would expect a hybrid to have a lower yield given the debt/equity nature of them.


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## Bill M (9 April 2014)

Julia said:


> Bill, does this actually work out to be a higher yield than if you just bought SUN shares with usual dividend and franking credit?  The latter would be grossed up around 7.5%.




I don't have SUN shares but I do have the SUN floating rate notes which entitles me to an allocation to the IPO. I know the SUN FPO stock yield is higher but I am not interested in it. I prefer hybrids, convertible notes and floating rate notes at this time so I will be sticking to them, cheers.


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## Julia (9 April 2014)

Bill, I wasn't questioning your choice.  Just curious about why you prefer the hybrids to ordinary shares.


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## Bill M (9 April 2014)

Julia said:


> Bill, I wasn't questioning your choice.  Just curious about why you prefer the hybrids to ordinary shares.




I am at a stage in my life where I need less stress and worry. By owning common stock, a simple bit a bad news can halve the share price overnight. I do not like the stress of watching stock prices go down fast and I don't want to risk big capital losses.

With hybrids, convertible notes and floating rate notes the prices are more stable. Whilst they do go up and down the volatility is no where near as bad as common stock. They also pay regular incomes, even through the GFC all my hybrids paid the interest and I like regular income. 

I also have enough cash not to want to chase high capital gains. I am happy loaning my money out at 6 to 8% to a company and get regular income. I have a portfolio of hybrids all paying me decent income.

Sometimes hybrids are not priced correctly, i.e. sometimes under face value or someone wants to offload a heap at a lower price. When this opportunity arises you have a chance of making capital gains as well. I do buy and sell some of my hybrids and make capital gains. It is not as good as the gains made from common stock but a few hundred here and there on top of the regular income is good for me.

I own and monitor several hybrids, when prices are not right I buy, when they run too hard up I sell. Sometimes they drop back again and I buy in again. I have bought and sold the same hybrids several times over. It is something I like doing and I make money from it.

In summary, I do not want the extra return for the higher risk so I will stick with my hybrids. I understand them, I make money out of them and I am comfortable investing in them.


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## Julia (9 April 2014)

Thanks for detailed response, Bill.  I completely understand and respect that you stick with what you feel comfortable with.


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## Bill M (11 April 2014)

Julia said:


> Thanks for detailed response, Bill.  I completely understand and respect that you stick with what you feel comfortable with.




Hi Julia, today is a classic example of why I prefer hybrids, convertible notes and floating rate notes.

The market is taking a dive, the XJO down about 1% and tech stocks down 2.4%. On the other hand my hybrids have barely moved and some have even gone up. It provides me a nice stable portfolio with decent income and I can sleep easy at night, cheers.


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## qldfrog (11 April 2014)

agree with you, they should be part of most of portfolios


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## Julia (11 April 2014)

Bill M said:


> Hi Julia, today is a classic example of why I prefer hybrids, convertible notes and floating rate notes.
> 
> The market is taking a dive, the XJO down about 1% and tech stocks down 2.4%. On the other hand my hybrids have barely moved and some have even gone up. It provides me a nice stable portfolio with decent income and I can sleep easy at night, cheers.



As I've already agreed, we'll all do what suits us.  
I like a large amount in cash - for the 'sleep factor' you mention and find simple trend following a fairly profitable approach to shares.  BOQ has just announced a 14% increase on the already very healthy dividend and has offered a decent capital gain.  Ditto most of the other banks for yield and imo security.


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## skc (7 October 2014)

A good article on hybrid, particularly the latest offerings.

http://www.sharecafe.com.au/ii.asp?a=AV&ai=31933



> Let’s see how this might work with the new issue of Commonwealth Bank PERLS VII Capital Notes. They offer a gross yield of 2.8% above the bank bill rate, currently about 2.6%, giving 5.4% in all. But if you were dead set on that yield (and bear in mind that we think chasing yield is generally a bad way to pick investments) then you could match it almost exactly with a portfolio of 50% cash on deposit with CBA (at 3%) and 50% in CBA shares (with a 7.8% grossed up dividend yield).
> 
> With this portfolio you’d be getting the same yield, but if everything travels along smoothly, then half your money should enjoy some growth in the income (and probably the capital over the long term) from the shares; and if everything goes to pot half your money will be safe (assuming it’s below the Government’s deposit guarantee).
> 
> Contrast this with the hybrid, which gives you the worst of both worlds by limiting your return when things are going well and lumping you in the same boat as equity investors if it all falls apart.


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## ricee007 (9 October 2014)

Everyone is entitled to their opinions.

I think Hybrids are but one more option.

Interesting exercise for you;
/Comsec/CBA/Charts/5year/Compare/CBAPA.
From 9 October 2009 to May 2010, neither outperformed the other.
From May 2010 to consistently through July 2012, the Hybrid outperformed CBA.
From July 2012, CBA has consistently outperformed.

Now try MQG v MBLHB.
The Hybrid is up about 12%, the Ordinary is down about 1%.
At the close of every single day over the last 5 years, the Hybrid has outperformed the Ordinary.

ANZPA outperformed ANZ for approximately half the time over the last 5 years (less clear cut, as ANZPA are only about 4.6 years old, but.

KBLGA v KBL? KBLGA has significantly outperformed since inception.

WOW v WOWHC? Same performance over last 12 months, WOWHC significantly outperformed over the last 6 months.

That article seems to consider two scenarios as possible.
1. Strong growth in equities, meaning your equity investment is safe & your dividend yield isn't too far behind your interest yield.
2. The ordinary shares, and hybrid instruments, are useless.

It completely fails to ignore an approximately stagnant market, or one that is experiencing modest to moderate declines in value. Here, a safe hybrid is much less likely to lose as much value as the ordinary shares - which means capital is preserved.... which is the "cost" of holding the equity instrument, and the reason as to why your expected return is lower.

Having said all that, why I got interested in hybrids originally was because i think some of them have, at times, been incorrectly valued ---> possibly due to being misunderstood / not as well researched / not having mandates to invest in them / too small for fund managers to bother investing in / etc


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## boofhead (9 October 2014)

The regulation on hybrids has changed and you will see issues for the last year or so having more conditions which make hybrids take more of a hit in bad times for the company.


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