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Hybrid Securities

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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
 
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
 
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.
 

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.
 
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.
Click to expand...

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.
 
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.
 
ricee007 said:
HBSHA sounds interesting, pity I missed out when they floated!
Click to expand...

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

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.
 
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
 
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?
 
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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