Our latest Investing Matters Podcast episode with QuotedData's Edward Marten has just been released. Listen here.
Surely the EPS will effectively decrease by 1.2%? Also, in addition to the dilution effect there will be brokerage fees for the sales but also for the purchasing of new assets with the money raised.
I have listened to the manager of NCYF say that it dilutes existing holders if issuance is at much less than 5% premium.
' Considerable care is taken not to dilute the revenue account, and
the manager wants to be sure that any new issuance can cover itself in terms of
revenue income generated until the next ex-dividend date. It would appear that the
board is open to providing liquidity to the market at the 5% to 6% premium level'
I know that many IT's issue at around 2% but I am still to be convinced that it is for the benefit of existing holders, especially as in this case when it is so close to a significant ex-divi date.
Unless I am missing something then the answer is no!
9.2M shares at a 2p premium- difference between latest nav and issue price -(assuming no costs ) benefits existing holders by £184,000.
if the div payment is 3p/share for 718M shares that is around £21,5M in total, so a 1.2% dilution of this (9.2M/718M) is £258,000 and this does not take into account dilution of any other reserves.
Beyond the extra liquidity for the company to purchase new investments it is hard to see that there is anything but a loss for existing holders when we are so close the the ex divi date.
(and they still have over 30M left under their latest block listing)
There certainly is a strong demand, they issued 9.2M share today to try to keep a cap on the price.
I do wonder whether the premium they are issued at this near to the ex div date is ever enough to compensate existing holders for the dilution in reserves especially after taking into account broker costs etc
Nav is now 161.4, however with the recession fear now in play it looks like the AT1's are peaking for now. I think the next (At1 driven) steps up will be more gradual until one of the banks calls one in and reissues. One of the Japanese banks had planned on a AT1 issuance but has now pulled it.
The yield on Bips is currently 7.14% so I am happy enough to sit and let the pull to par unwind over a few years.
They have got permission for their new winery, now we await how it will be funded and what happens to he existing facilities that they have just expanded! I believe that Quinn's may be involved so expect it to all come with the addition of a bit of housing....
From KM-
'Plans for a huge new winery in the Kent countryside have narrowly been given the go-ahead in a controversial decision.
Councillors said there were “exceptional” reasons for granting the bid by Chapel Down for an area of outstanding natural beauty (AONB) near Canterbury.
The £32 million project will see the UK’s biggest English sparkling wine producer relocate its production facilities from Tenterden to farmland at Canterbury Business Park, off the A2 near Bridge.
The city council’s planning committee approve the scheme at a meeting yesterday evening, despite objections from countryside campaigners and watchdogs.
The pros and cons of the application at Highland Court Farm, submitted by business park bosses, divided councillors - with permission eventually being granted seven votes to five after a near hour-long debate.
The proposal is for a 120m x 100m, 42ft high production building for Chapel Down and two further smaller storage warehouses, including one for bespoke wine producer Defined Wine, which already operates from the site.
Chapel Down chief executive Andrew Carter told councillors the company was on a mission “to change the way the world thinks about English wines forever”.
Nav up 1.5p in the week to now sit at 100.9.
Over the past year they have been reducing their holding of CMBS, one of the current areas of greatest concern, they now only hold 5% in this class in TFIF.
BAMAKO, March 30 (Reuters) - Transitional authorities in Mali will review mining contracts after an official audit of the sector advised that the state was not receiving a fair share of gold-mining revenue, the council of ministers said on Wednesday.
Mali is one of Africa's largest producers of gold, which is its top export. Companies operating in the country include Barrick Gold Corp ABX.TO and Resolute Mining (RSG) .
The council said an action plan would be implemented and would include creation of a commission to renegotiate mining deals, a move to repatriate cash earned from gold exports and the adoption of a mining sector environmental code.
"The action plan will be implemented via a participatory approach, including the mining companies themselves," it said in a statement without providing a schedule for the measures.
Soon after coming to power in a 2020 coup, the military junta vowed to review mining contracts signed with companies by previous administrations.
I thought it may send the shares down but perhaps the potential to resolve the vat issue and put taxes on a clearer footing is considered a positive.
AT1's look to have bottomed out and now seem to be on the rise (famous last words!). The ivz AT1 is up 3.5% today following a slight rise yesterday and is now sitting comfortably over 3000, the highest it has been since March 20th. Hopefully it will see us back to nav's over 160 again.
Invesco came back to me and finally answered almost all of my queries, some in greater detail than I was expecting, so complements to them for being responsive.
I will not go through them all but if you wondered why the undistributed current year revenue dropped from approximately 4 to 3p after last weekend, then it is because the excess from last year has been transferred to the revenue reserve. Nice to know they are building a buffer and that we still have more than enough left to pay this quarters divi with spare to provide a good head start for the following quarters.
The new management team really do seem to have turned this around with a very clear focus on the core business.
The results for the full year look good and the team have a good grip on the finances.
I still think that it will need more clarity about the new winery (and its funding) before the shares really take off (planning meetings scheduled over the next couple of months) but even so I can see the potential for an upward trajectory from here.
I am also lookin forward to trying the 2022 vintage wines when they are released as they could be exceptionally good!
Well I have to say that Invesco were rather disappointing with providing responses to my requests for information. Whilst a couple of the points have been addressed with more general statements on their website (such as percent AT1 holdings), they failed to answer questions about call dates . I also questioned why the same fund manager adopted opposing strategies for their Credit Swiss holdings between the open and closed funds, with Bips increasing from the end of February and all of the other open funds decreasing.
What was odd was that they would not comment if they had increased or decreased any holding -despite having already published this exact information on the Invesco website!
Fortunately Twentyfour are much better at customer relations and have provided a good running commentary on their Insights page most of which has relevance to Bips, note, I pair TFIF (mainly ABS) with bips (HY) along with a smaller holding in smif (HY, ABS,+other).
Here are some recent comments that may be of interest.
'CoCo bonds suffered from the worst contagion we’ve seen since their inception back in 2013. Dispersion has been huge though with Swiss and low reset bonds lagging the recovery from intraday lows last Monday. Compared to the recent peak in early February, CoCo bonds are down anything from 3-4 points (for example HSBC’s 6 call 2023) to 30 points (such as DB’s 4.789 call 2025). A reasonable number of these bonds are trading at levels we saw briefly in March 2020 when fears of a very deep global recession took hold with non-performing loans (NPLs) spiking to GFC levels or higher. Others are trading at levels similar to those we had in late September/early October last year when, in the context of an expectation of a severe energy crunch in Europe, the ramifications of the UK’s mini budget added further pressure on European bank bonds as well as risk assets more generally.
At these levels the CoCo Index (excluding Credit Suisse bonds) trades at a weighted average price of close to 83 cents. Given that these bonds are perpetual with call schedules this translates into a majority of bonds being priced to perpetuity. In other words the yield to worst calculation equates the price of the bond with a perpetual stream of coupons and no principal payment, forever. The resulting weighted average yield to perpetuity at time of writing is close to 9%. Whereas if we price the bonds to their first call the resulting yield is approximately 11.5%. '
There is an article in the FT today. In this they state that $37b of AT1's issued globally have call dates for April. The information I had about $13b this year came from Blackrock but this was in reference to European banks (which is more relevant to SMIF). Given that the entire AT1 market is supposedly $260b, I do struggle with the $37b mentioned by the FT as it would imply that you would, on average, call the entire market in less than a year!
The most recent update on Twentyfour is worth a read, in they point out that even if the AT1's are never called then the return on a composite index is 9% , with calls it is around 11.5%.
Nav now heading back up and is 99.4p .
This has come through the turmoil of the banking upsets quite well with the nav only dropping about 1p. With the recent further 0.25% on base rates in the UK and 0.5% in the EU it has plenty of potential for returns provided the defaults do not ramp up too high.
KBW101, I am curious, if you sold out at 12p why have you spent a year (or more) almost solely posting on this board?
Normally when I sell out I just move on to what it is I am holding, not what I used to hold, the latter seems rather pointless and a waste of time.
AT1's under a bit more pressure today. Deutsche Bank(DB) is now in the spotlight. DB AT1's down about 4.5% today reversing most the gains from the past few days. BIPS holds/held around 1% in total in AT1's from DB. The AT1's of stronger banks such as Barclays are only off a tad. Hard to see that the EBA will let this go down the same route as CS or they will have both a major banking crisis and little chance of banks being able to raise capital via CoCo's again.
From what I can discern generally non financial HY has held up OKish over the past week . Outside the AT1's the main fallers seem to have been bonds from insurers, these have moved in tandem with those of the banks and probably accounts for most of the remaining decrease in nav.
Thanks. I appreciate it when others post useful info so it is nice to reciprocate when I can.
I do have quite a large holding in this so I have been trying to find out as much as I can. I am still waiting for them to clarify a few points still though.
Yesterdays closing nav was 160.3 so its still continuing to recover. quite nicely. The share price has typically been sitting a couple of pence above this so this should we should soon see it in the range 162-164.
At bit more clarification from Invesco. BIPS has around 30% in subordinate financials, of this around 20% is in AT1's. Although it is rather Bank specific these will be down around 10% since the highs in February so approximately 2% of the nav then add in the 0.65% write off in CS round it all up to 3%, so about 5p is off the nav specifically due to the banking/AT1 problems.
Barring the 0.65% this should hopefully unwind over time.
Further update yesterday on-
https://www.twentyfouram.com/insights
You can follow the AT1's (AT1 ticker) - this had about 7% CS at the end of Feb which needs to be taken into account. The etf obviously hides quite large company differences since the weekend with a better recovery of the strongest banks.
The amount of AT1's that banks hold as a percentage of their cet ratio also range from 28% UBS & Barclays to 13% Lloyd's & ING.
The next interesting development will be whether those that are up for being called are called on time(even though perpetual they are expected to be called periodically). I believe that there is around $13b worth this year but nothing for at least a couple of months which will give things time to settle.
Hats off to Twentyfour for keeping holders well informed, I also hold BIPS and Invesco have, in contrast, been far less forthcoming.
I have taken this from Twentyfours website - as they seem better at keeping their customers informed than Invesco!
'AT1s fell sharply on Monday morning by between 7-15 points with higher beta names and UBS underperforming. Nonetheless, the importance of the European and the UK’s regulatory rebuttal to the weekend’s proceedings became apparent as post their respective statements, a quick rebound took place and by the end of the session roughly half of the move down had been recovered. The positive momentum has continued through yesterday and this morning with some bank AT1 bonds now back to last Friday’s prices – i.e. recovering all of the post-Credit Suisse action, but still lower than pre the US regional bank led sell off.
To give a few examples, at time of writing BNP 7.375% and BARCLAYS 8.875% are two AT1 bonds to have recovered to Friday prices. Though it should be said that both bonds are still down over 10 points from their February highs and are yielding over 10% to call in sterling terms and around 10% even when priced to perpetuity'
Not sure about the BPN bond but I think that BIPS holds around 0.9% in the Barclays bond (hard to be sure without exact bond number).
Nav has come off its low of 157.5 back up to 159.1 (at close on the 21st).
It was interesting to note that they added to CS (doubled?) over the first two weeks in March in BIPS, but the same fund manager either held or reduced in their open ended fund(s), Why the different strategy?
They have increased repo borrowing by 1%, assumedly to take advantage of the price falls. Most AT1's are now paying double digit yields, so as long as the market settles, there are no more defaults and the bonds are called when expected (there are 'perpetual' but are still called), then I am quite happy taking a >7% divi whilst I wait for the nav to recover.
They already have almost 4p of undistributed income, so no problem covering the next 2.875 divi that they have just announced.
It is the benefit of the higher rates now available that the fund can bare the odd default with no impact upon payouts.