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The Royal Bank of Scotland Group plc Message Board

  • rexobXIP rexobXIP Sep 18, 2009 4:03 PM Flag

    Is the F,H and L premium worth it?

    These preferred are now trading at a 6-9% premium over the others. Is this worth it in the opinion of board watchers? What are the odds these get paid and others don't?

    Just seems so unlikely to me as all are Parri Pasu and this would open up huge issues for RBS and the EU (if they start picking winners and losers at random)

    Would anyone out there pay a nearly double digit premium for the degree of protection these early issue prefs offer?

    Opinions are encouraged.

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    • One school of thought for the higher price (as manifested by a lower yield), is that these issues have the highest stated coupon.

      1.) If you look at the history of redemption, RBS has ALWAYS retired the highest coupon yield first. So it would be a good bet that series F will be the first preferred retired.... So this will be the first to get paid out at $25... hence the higher current price. Please note I am not predicting this will occur in the near future... but if/when it does occur... F will be the first called

      2.) One might also argue that the higher coupon yield has other positive advantages.... and therefore one would expect that this would drive a price premimum.

      Most likely these are not quantifiable dimentions...... but for even me who focuses on yield, the vast majority of my RBS preferred holdings are concentrated in F & H.

      So unconsciously I have assigned a higher value to these issues..... and I consider myself objectve..... And it seems there is a market bias that supports this premium. Right or wrong...... in the final analysis.. the Market wins.

    • Well, my understanding is that they are classified as debt by RBS, and as such are more like a bond than a stock. And yes Iwould, and have , paid more for them.

      • 1 Reply to catdriver32817
      • But they are not debt... they are preferred stock, Parri Pasu with all the other preferred shares, and certainly have no higher standing in a liquidation than any other preferred. There is a difference in how Brits and Americans define debt and that has led to some confusing language...

        Still, these are cquity in the capital structure. I understand you paid more, but I am not convinced you received more. I am working to understand, and have written to the finance dividsion of the EU/EC, as well as had long discussions with the folks at RBS investor relations (who for the record say there is no difference betwen the shares)--Not that I am convinced by what they say either.

        Oh well, I will just kep looking for insight.

        Good luck to all RBS investors.

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