Hybrid Securities

[Julia]

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]

... 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]

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]

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]

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]

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

 

[So_Cynical]

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.

 

[Calliope]

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.

 

[Julia]

"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]

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".

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).

 

[Calliope]

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.

 

[Bill M]

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?

 

[ricee007]

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.

 

[Bill M]

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.

 

[ricee007]

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.

 

[Bill M]

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.

 

[Stephen]

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?

 

[Stephen]

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.

 

[prawn_86]

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?

 

[McLovin]

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.