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The Royal Bank of Scotland Group plc Message Board

  • gamespeplplay gamespeplplay Sep 8, 2009 8:25 AM Flag

    meaning for RBS common and pref's?

    Any thoughts on latest from G20 proposals? Looks like a new set of capital requirements is being proposed that could impact dividend payouts and stock buybacks.
    http://www.ft.com/cms/s/0/cb938b36-9bd1-11de-b214-00144feabdc0.html

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    • Hi,

      I'm delighted the RBS reps claim it's all or nothing. Hopefully the EU agrees with them. And I certainly have no quarrel with you or anybody who wants to buy the Series N, etc. I'm just naturally cautious and when it's all priced the same I'd rather have the ones that don't say:
      "Dividends on the Series N preference shares are discretionary..." and "such non-payment shall not prevent or restrict (a) the declaration and payment of
      dividends on any other series of our non-cumulative preference shares..." (all from the prospectus).

    • Hi,

      I actually said the yield on the F's was "irrational"--irrationally lower!

    • yes, and that is a good framing of the situation.

      Greencreek I think captures too the situation and possible outcome, although what is expected to remain under the RBS umbrella subsequent discussions and agreement with the EC may be quite different from today's expectation.

      thanks,

      jack

    • Hello,
      I lurk here frequently, post infreqently, own both the RBS H's and ABN G's. The ABN situation is complex, but I believe the Bank(ABN)is owned by a holding company (ABN Holding) which is owned by another holding company (RFS Holding for RBS, Fortis and Santander, the original shareholders of it). ABN and ABN Holding both have some resposibilities re the preferreds and both are expected to survive the split-up. The bank will be renamed RBS Bank Netherlands or some such and the Fortis piece (now owned by the Dutch govt.) will demerge and will pick up the ABN/Amro name as a wholly separate bank. Santander will receive a $5 Billion (M or L) dividend from ABN Holding later this year through RFS Holding to pay it off. The key to all this is that the ABN preferreds will be supported by a much smaller bank in the future but it will be wholly owned by the RBS Group. On the other hand by paying Santander a dividend the ABN preferreds must pay dividends for the next year assuming they're in compliance with Dutch capital requirements. Also, as I read the EU actions, they have not yet required a functioning bank to default on its interest or dividend requirements. The bank must, however, ignore the wink and a nod which accompanied the issuance of these hybids and excercise all options in favor of retaining capital. I welcome other's views. All of this, of course, IMHO.

      • 2 Replies to greencreek
      • Good posting!

        I too had understood the hybrid wink and nod - no maturity, but we will call them when the call date arrives. No doubt buyers thought it would continue in all circumstances just as they thought auction rate securities would always be liquid (or that they could refinance their homes when the bullet came due, or that their homes would always increase in value, or that the AAA rated securities would never default, or that...).

        I really cannot imagine the EU causing RBS to default on interest pmts (maayyyybbbeee dividends). However, as I have posted, it all comes down to the economy.

      • greencreek, i have trouble following the bouncing ball, even as you spell it out. maybe if i draw a chart i will be able to follow.

        can any of this explain why the market puts rbs pfds(for lack of better term) a 15% div risk, and abn e&g a 16.5% risk, and abn F at 13.3%?

    • ""from Royal Bank of Scotland to Switzerland’s UBS – have been buying back their own hybrid debt at knock-down prices in recent months""

      are they talking about what here are called rbs pfd F-T?

      are they allowed to purchase at market and market prices? if so, that really does open up a can of worms. send out really bad news, or terminate the dividend, and gobble up the stock at dirt cheap prices.

      Or are they required to make a tender offer, as did STD, using a replacement stock. i do not know what is true value of STD offer, as it is bunch of bits and pieces.

      • 2 Replies to taintedfud
      • There may be, but I know of no prohibition of buying shares or debt on open market. But, in this instance, I believe it was the offerings earlier this year and noted on page 17 of the financial first half:

        "In April, the Group concluded a series of exchange offers and tender offers with the holders of a
        number of Tier 1 and Upper Tier 2 securities which resulted in an aggregate pre-tax gain of £4.6
        billion, of which approximately £3.8 billion was taken through income and the remainder through
        equity"

        One can only speculate what the EC will conjure up for RBS. I do believe that the fact the UK has common shares and not preferreds or debt makes quite a bit of difference.

        However, the asset protection scheme outline requires the UK to infuse 19.6 billion in B shares (preferrence), and I think that this may be a troubling and complicating factor for and with the EC. Indeed, I've wondered if the August prospectus for the 45 billion U.S. dollars in new debt (or preferrence, or common, the prospectus was a bit ambiguous) is or may be an attempt to cover and replace the 19.6 billion pound UK obligation for the APS. Another 6 billion pounds can be called by RBS next year from the UK, and that total 25.6 billion pounds almost matches the US dollar prospectus total.

        It appears to be pretty complicated, politically speaking. The UK and RBS came up with a plan that in my simple mind looks like a good and feasible plan to restore RBS to health in the next couple years, maybe 3 years, that may actually see the UK making money on the strategy. Under the plan, existing common has and will continue to suffer because of the share dilution.

        The first question is whether the plan meets the EC targets. The second is whether the EC wants someone else like preferred holders to share in the plan, and the ancillary question of whether suspending coupons is a substantial benefit to recovery. My own thinking is that only in instances that a government has actually taken a bank into receivership, where the bank clearly does not have resources to recover, should divis be suspended; mostly because of the havoc it can play in debt markets.

        An exchange offer might make sense, but this would dilute the UK owned common -- little wrenches everywhere making for complications.

        What is clear is that the EC is using the current event to project and claim power.

        Finally, it is very notable that RBS is not mentioned as a primary candidate needing new capital infusions -- something stemming quite directly from the common shares in place already by the UK.

        cheers,

        jack

      • The redemptions did not involve any of the ADR preferreds, they were on certain preferreds in Europe. It was done through a public offering of redemption at specific prices that were above the market but were below par. I think the prices were in the general range of from 40% to 60% of par, depending upon the particular issue.

 
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