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Heading back towards pat after today’s refinancing news. With a 7% coupon on these and running to 2023 what is not to like here. Solid !
Yes look in a pretty good place. Compared with 16 months ago incredible. Never forget though that oil can do anything but with hedges and refinancing then the chances of this one not being repaid now seem low. Expect this one to go over par soon, will probably cash out at that time as will leave happy.
Does anyone know how new pik bonds are treated for income tax purposes?
Good question. I think the answer is that (unless held in an ISA) that they should be valued at the fair value of the bond at the time of the PIK issue, with any change between then and redemption/sale a capital gain. i.e. if the bonds were trading at 50p in the £1 when the PIK were issued and you were issued with 1,000 new £1 bonds, then the income would be £500, and if they are subsequently redeemed/sold for £1 a bond/£1000 you have a capital gain of £500 at the time of sale/redemption. All the interest should be declared as income. Just my reading of things, but if you want to be sure you would need some expensive advice.
Thanks for the reply pyueck. This is a little complicated for a rank amateur.. For the amount of 'interest' that I have above my tax allowance professional advice is probably out of the question. Is there a capital gain on this bond or just for the pik component? I believed the original bond was 'qualifying. Thank god for ISA's.
There would be a capital gain on any bonds that are acquired below par and then sold/redeemed at or above par.
I.e. if you bought the bonds at £1 a bond and in 2023 they redeem at £1 a bond you would have no capital gain on the bond but would have a capital gain on the difference in the fair value of the PIK bonds at the time of issue and the value at the time of redemption. If you bought the bonds at £0.5 a bond and in 2023 they redeem at £1 you would have a capital gain on the bond too.
Unless you have a large amount of capital gains in the year these dispose of (and don't have taxable losses you can offset them again - always worth checking), then unless you hold very large amounts of these bonds then capital gains in unlikely to be an issue as capital gains allowance is £12,300.
Now squeaked in just above par at 101 ask price. Nice positive signal.
Exchange offer. Think I will take it up. 9% Notes.
Yep will take up exchange especially as they pay a bonus on top of 1.5%. However may not hold too long have learnt a big lesson that oil is a boom and bust game. It's boom at the moment but the new bonds are until 2027 which is a huge time in this game and what looks all rosy now can soon change in 5 years. I suspect in any case if the company does really well they will be repaid in a few years so won't get 5 years of 9%.
Does any one know that the quoted price is 'Dirty' or 'Clean' for this bond. I sold some in April before the rehash, but was told by AJ Bell that accrued interest was not payable, Though it was showing separately in addition to the price on two valuations before I sold, but their dealing dept refused to budge. In the past 5-6 years ago the accrued interest was always added on buy/sell price apart from the time when It was not paying cash but PIK. So I then bought back some just to chaeck! AJ bell duly cgharged the accrued interest on the buy.
Needless to say I have complained to the Ombudsman, had an automated reply but it will probably be several months before they get round to having alook.
So in the meantime will be interesting to know if someone has sold or bought recently ?