Royal Bank of Scotland’s equity will be massively diluted by preferred share conversion:
Investors in RBS’s $1 billion of 9.118 percent undated preference shares issued in 2000 have until the end of December to exercise an option to be repaid in common stock, according to the issue documents. The option was triggered after the Edinburgh-based bank failed to inform investors at the start of this month that it would redeem the notes at the next call date.
…
If all the preference shares are converted, the new shares will represent about 11 percent of the company’s common stock not held by the U.K., according to Bloomberg calculations based on current share prices. RBS was prevented from calling the notes under European Commission rules on the bank’s 45.5 billion-pound rescue, which left the U.K. holding 70 percent of RBS stock.
One of the committments in the restructuring plan is:
Requirement that RBS shall not pay investors any dividends or coupons on existing hybrid capital instruments (including preference shares and B Shares) or exercise any call rights in respect of such existing securities for a two year period unless there is a legal obligation to do so. The extent and timing of this obligation and the securities which it will impact is subject to further discussion between RBS, HM Treasury and the EC.
Dealbreaker has some man-on-the-desk reaction to the UK bonus super-tax discussed yesterday:
This is major news here; everybody (even my group head) is talking about either moving to hedge funds, boutiques or buy-side (which aren’t subject to the supertax), or relocating to Zurich, NY or HK. Even if it’s only a one-year tax as currently drafted, people have lost faith in the UK political leadership. The long-term future of the UK is at risk and nobody seems to give a shit as they’re too busy trying to punish bankers for our supposed misdeeds.
How much of this is talk and how much is action remains to be seen … it is also unclear how much these guys’ skills would be worth outside a brand-name firm. None-the-less, if I was a mid-size bank thinking about expanding with a new European trading operation … I’d be thinking harder!
A mixed, quiet day for Canadian preferreds, as volume returned to more normal levels, PerpetualDiscounts lost 5bp and FixedResets were able to gain 1bp, to set a new record low for yield.
Sorry this is so late – PrefLetter, the holiday season and family commitments are ensuring I stay off the streets and out of trouble nowadays.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1951 % | 1,519.3 |
| FixedFloater | 6.00 % | 4.12 % | 36,946 | 18.64 | 1 | 0.6104 % | 2,597.4 |
| Floater | 2.57 % | 3.01 % | 98,843 | 19.63 | 3 | -0.1951 % | 1,898.0 |
| OpRet | 4.86 % | -3.36 % | 153,737 | 0.09 | 15 | -0.1147 % | 2,309.1 |
| SplitShare | 6.39 % | -3.97 % | 256,344 | 0.08 | 2 | 0.2431 % | 2,101.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1147 % | 2,111.4 |
| Perpetual-Premium | 5.88 % | 5.68 % | 71,582 | 2.35 | 7 | -0.3516 % | 1,875.3 |
| Perpetual-Discount | 5.82 % | 5.89 % | 200,037 | 14.01 | 68 | -0.0523 % | 1,786.4 |
| FixedReset | 5.42 % | 3.73 % | 362,839 | 3.89 | 41 | 0.0134 % | 2,156.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| ELF.PR.F | Perpetual-Discount | -2.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 19.57 Evaluated at bid price : 19.57 Bid-YTW : 6.91 % |
| CIU.PR.A | Perpetual-Discount | -2.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 19.66 Evaluated at bid price : 19.66 Bid-YTW : 5.90 % |
| BAM.PR.I | OpRet | -1.45 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-07-30 Maturity Price : 25.25 Evaluated at bid price : 25.82 Bid-YTW : 4.71 % |
| HSB.PR.D | Perpetual-Discount | -1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 22.08 Evaluated at bid price : 22.21 Bid-YTW : 5.74 % |
| CL.PR.B | Perpetual-Premium | -1.28 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-30 Maturity Price : 25.25 Evaluated at bid price : 25.48 Bid-YTW : -2.84 % |
| MFC.PR.C | Perpetual-Discount | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 6.05 % |
| ELF.PR.G | Perpetual-Discount | -1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 17.57 Evaluated at bid price : 17.57 Bid-YTW : 6.89 % |
| PWF.PR.E | Perpetual-Discount | -1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 22.60 Evaluated at bid price : 23.32 Bid-YTW : 5.95 % |
| IAG.PR.A | Perpetual-Discount | 1.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 5.98 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PR.P | FixedReset | 303,320 | Nesbitt crossed blocks of 60,000 shares, 177,200 and 50,000, all at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-30 Maturity Price : 25.00 Evaluated at bid price : 27.24 Bid-YTW : 5.25 % |
| IGM.PR.A | OpRet | 212,924 | Called for redemption. Nesbitt crossed 200,000 at 25.97. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-07-30 Maturity Price : 25.67 Evaluated at bid price : 25.96 Bid-YTW : 3.31 % |
| TD.PR.G | FixedReset | 212,634 | Scotia crossed 200,000 at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.75 Bid-YTW : 3.78 % |
| TD.PR.M | OpRet | 169,800 | Desjardins crossed 25,000 at 26.40; Nesbitt crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-01-09 Maturity Price : 26.00 Evaluated at bid price : 26.40 Bid-YTW : -7.93 % |
| BMO.PR.J | Perpetual-Discount | 94,799 | Nesbitt crossed 60,000 at 20.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-12-10 Maturity Price : 20.40 Evaluated at bid price : 20.40 Bid-YTW : 5.57 % |
| TD.PR.E | FixedReset | 78,956 | Desjardins crossed two blocks of 25,000 each at 27.54. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.80 Bid-YTW : 3.73 % |
| There were 34 other index-included issues trading in excess of 10,000 shares. | |||