Provident Financial 6% Sept 2021
Things look a bit more stable at Provi now and ords share price looking stable over the last few months albeit couple of percent lower today.
These bonds are currently on a YTM of around 5.05 % and running yield of 5.93% excl dealing charges. With such a short time until maturity and just I think around £60m in issue I suspect they will be allowed to mature and unlikely at the moment to extend with a bribe.
I already have quite a few of the 2023 ( about 3% of total portfolio ) but tempted to have a few of these too, am I being over optimistic and missed something ? Maybe maturity will be pushed back ?
All comments welcome.
These bonds are currently on a YTM of around 5.05 % and running yield of 5.93% excl dealing charges. With such a short time until maturity and just I think around £60m in issue I suspect they will be allowed to mature and unlikely at the moment to extend with a bribe.
I already have quite a few of the 2023 ( about 3% of total portfolio ) but tempted to have a few of these too, am I being over optimistic and missed something ? Maybe maturity will be pushed back ?
All comments welcome.
Comments
I already have some - what might the "bribe" be? Surely if pushed out 2 years then presumably it would have to match those PF23s (7%). That would be nice.
Probably O.K. but..
Have also been holding off as a Trading Statement is normally published around now.
I have both the 21's and 23's. I don't really want any more 21's as I would rather have something with a longer dated redemption and I feel the moment has passed on the 23's at 100p to buy.
Happy to hold both but not inclined to add.
tbh nothing in the bond area takes my fancy at the moment. Perhaps it's because I cannot find the mindset to move on from the yields that were available 3-6 months ago but with most issues trading at above par and some above the pre-Covid price it seems to me the world has gone mad.
dandigirl, yes there's a lot of money to be found in just a couple of years or so but that's what makes me feel they might just push these out timewise and include an inducement of some sort but probably not as attractive as the IPF extension.
JammyDodger, thanks I feel a bit like you that prices in general on ORB are not that attractive but I am only thinking of the Provi 21's being better than anything else to park monies in the short term. However on reflection I am getting cold feet and don't think the return is worth it on such a risk as Provi . As Laughton stated an uplift to 7% for extension might be worth consideration.
However, the bit I don't understand is that the FCA will have determined the maximum they can borrow from savers and they will still require some Tier 1&2 capital so I don't think it's a given that the whole bond will be repaid
96.75p to buy at the moment on the 21's
I have a small quantity of both 21's and 23's, having (luckily?) sold three quarters of my 21's only last week to spend on NCYF instead.
I have decided to do nothing. The 23's seem to have come down to a price which seems to me in the right ballpark. The 21's look priced wrongly to me but I'm not entirely sure about the level of security on each issue as I found the prospectus's a bit hard to unravel on that matter.
I already have some but must admit, I'm tempted. Surely they must be able to get through to September???
For me the 23's would need to be around 90p to be worth a punt.-risk/reward.
Their CET1 ratio is 34.5% with £145m of headroom and that would seem to imply they have anticipated the current situation.
I am assuming the 21's are under pressure as I'm guessing the market was expecting them to be paid off at maturity, but now there may be some question as to whether they are rolled or there is a new issue, in either case possibly for less than the outstanding value. I guess the coupon would depend on the scheme of arrangement.
it would be helpful if this issue is rolled in something else as there are so few options on ORB.
N.b. get the feeling that the Provi bonds have stabilised now and no more large trades going through. Wonder if the idea of 21's may have redemption/rollover option is steadying the ship ? IPF style 7.75% might do it for some.
Not sure that is possible/likely as things are going at the moment. Treasury yields in US (and therefore ultimately everywhere) moving relentlessly upwards and " projecting" 3.4% on the 10 years.
What rate would you be happy with if tying your money up for 5-7 years?
Personally I'm happy with the PF21s - maybe by September things will be a bit clearer both for PF and fixed income in general.
Almost all of my fixed income is due to mature over the next 4 years although I do have some "irredeemable" prefs paying close to 6% (over 6% based on prices I can sell for). Happy with continuing with what I consider the "safer" issuers - ELLA, NWBD, AV.A. Not so sure about LLPC, LLPD and SAN.
I agree with the sentiment. I really wish there were more new issues regardless of coupon or duration as then there would be more choice. A 5% return is the sweet spot for me on 5 years, probably 5.5% on 7 years.
I have taken a mixed approach where I also own some bond IT's. I'm paying someone else a percetage to do not very much but it does provide access to the bond market. Of course, the challenge with doing this is that if interest rates go up too fast you take a permanent capital loss on the share price of the bond fund.
I have recently bought NCYF and HDIV. NCYF very high yield debt but it's trading below NAV for only the second time in the last 10 years. The dividend hasn't been fully covered for years on NCYF and is now 9.1%. They should cut it really but I'm in with the knowledge I'll accept a 3% capital loss each year (mine are mostly ISA and SIPP'ed)
HDIV is a bit different sitting at around a 8% discount to NAV, much lower risk investments but only a 5.4% dividend yield. I reckon the dividend is covered though and the investments are far more robust than NCYF. It's probably the better trade at today's price's as I think I'll get the dividend and the yield will close, the inherent investments are less risky and it better suits my risk profile.
Anways with gilts rising at least there is the possibility of getting a slightly better return on our money.
The scheme of arrangement regarding redress claims worries me on several levels.
ideally I'm investing on the basis my capital is only at a tiny tiny risk and PFG doesn't fit my criteria any longer.
Specficially whilst the company have a plan to deal with the redress claims by going nuclear if required and dumping the subsidiary involved into administration, I worry that someone at the claims management companies will find a way to bring the liability back to the parent.
Or alternatively the company suffers so much reputational damage it if forced to revise the scheme or withdraw it. I do not think the newspapers are simply going to ignore it given that the victims will be small borrowers who could really use the money. Getting 10% back instead of 100% isn't going to cut it with the media headlines.
Finally I worry those clever claims management people fina a way to shift the cut off date for applications to delay the scheme thus getting their claims in at 100%. Probably I shouldn't worry about this one.
As an aside and of no relevance to my decision is it a conincidence that they propose to put £65m into the scheme of arrangement which is exactly the same as the issue size of PF21?
From the RNS on this topic
"For context, the number of complaints to the Financial Ombudsman Service (FOS) across the home credit market increased by c.200% in H2'20 vs. H1'20. For PFG, this has resulted in payments to customers of c.GBP25m in H2'20 (H2'19: c.GBP2.5m) including first response and FOS redress payments. In addition, CCD has processed balance reductions for home credit customers of c.GBP11m during the same period (H2'19: c.GBP1.0m)."
Good luck all that sail in this ship.
The law of unintended consequences.
Btw and as an aside what happened to Kuffeler/NSF-can they fill the void or are they in such a state of flux that they will be unable to step up ? I see the share price has collapsed over the last few months and years.
https://www.londonstockexchange.com/news-article/PFG/pfg-2020-preliminary-results-announcement/14969103
There were probably three points of note:
1. The judge was not persuaded that Amigo was at any threat of immediate administration.
2. The judge felt the scheme was not sufficiently explained to creditors
3. The judge felt the offer of 10% for creditors was not sufficiently based in evidence (meaning alternative schemes were not sufficiently explored) leading to
4. The rise in share price of Amigo suggested the scheme was beneficial to shareholders and not the creditors.
Also the judge felt £15m to put together a revised scheme of arrangement to be wrong.
My view of the overall situation is that the judge was open to a scheme of arrangement but not this one as a) the numbers didn't appear to treat the creditors fairly and b) some of Amigo's numbers were pulled out of thin air, questionable or perhaps simply wrong.
It was Amigo's stance that it was this scheme or administration so the judge has effectively called Amigo's bluff. One of the questions that was asked is why it could not be considered whey the creditors could not become shareholders in a scheme of arrangement.
PFG's scheme is different in that it only proposes putting part of the group into administration
One would have expected there would be a read through to PFG but initially the 23's actually rose in price. Perhaps this was the MMs playing around as both the 21's and 23's have slipped a bit since mid morning yesterday. Not very much though and the bid is still holding on the 23's.
PFG shares have been slowly falling since the news but in a slow controlled manner. Indeed initially so slow it made no sense to me, or perhaps it was slow as the sellers were finding plenty of buyers. The buyers seem to be drying up now. The shares are now down 15% since the news although the shares ran up strongly into the judgement.
I don't hold but still follow out of interest. I sold my 21's and 23's about 6 weeks or so ago as this is too risky for me.
Don't know if the link below will work but the Redwood Master Fund of Cayman Islands has gone from zero to a 10.3% shareholding.
https://ir.design-portfolio.co.uk/viewer/26/12820?utm_campaign=12424090_RNS alert (PFG:12820)&utm_medium=email&utm_source=Design Portfolio Marketing Services&dm_i=9LG,7EAHM,4CE8P4,U17WX,1