Hybrid Securities
- Thread starter Warren Greenspan
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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
http://www.smh.com.au/business/moodys-may-downgrade-24b-in-hybrid-securities-20091119-ip0c.html
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.
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.
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.
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.
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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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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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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thanks Calliope, exactly what I wanted.
ask and ye shall be answered, praise be to ASF
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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Nothing new here. That link was given by hardyakka in post #10 eight months ago.
Bill M
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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.
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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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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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.
Bill M
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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.
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.
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.
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.
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.
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.