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The Royal Bank of Scotland Group plc Message Board

  • rexobXIP rexobXIP Nov 6, 2009 10:22 AM Flag

    F, H and L seem overpriced

    No one responded to my earlier post about the pricing of the "safer" RBS preferreds. The F, H and L shares are selling at a price that has the buyer paying 100% for the next 2 years of dividends. Even if there was 100% certainty that these classes would pay divis and the others wouldn't -- and there's not -- what would motivate anyone to pay full price for divis even if there was zero risk. Essentially, you are paying $3 today to get $1.50/year for the next 2 years.

    If RBS is not reinstating divis on the other classes in 2 years, then it is highly unlikely they will still have retained earnings to keep paying the F, H and Ls.

    And, just to reitterate, all this is premised on absolute certainty that they are going to keep paying on the F, H and Ls while suspending all others.

    What is the logic of this pricing? Am I missing something? Jack? Robby? Anyone?


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    • Yes they are overpriced. They made the serious mistake of spilling over PF securities their solvency problem. No one can reasonable get near to any RBS PF with good money under these circumstances.Here we have a high profile financial institution falling prey to gamblers and speculators and lawsuits in the pipeline. Plus the additional moral hazard of the well founded suspicion of a hidden buyback of PF shares through a shady market created by the anouncement. For instance when Ford PF were selling at 4 USD Ford made a clean purchase PO at 7.50 early this year. Never hinted suspension of dividends. Now it trades at 20. And Ford was having loses and facing the automative crisis. Who could believe that an Institution like RBS would suspend PF dividends ! This is a mistake that will be a case study in Universities for years ! EU request for Pain Sharing? Neelie Kroes wants blood ? Good grief !

    • Probably correct assuming there is some risk of deferral. Frankly, I'm adding G, E's.

      If the L, H, are not suspended they will go up 3 bucks fairly quickly. If suspended, down. And since the others appear to be price assuming suspension.....????


    • It seems F,H,L are more like subordinated debt. So in case of BK, they will do better than the other equity prefers. Maybe they are pricing in a little of that advantage.

      • 1 Reply to jm204
      • Not suspending the divi is possible because of fine print in the prospectus on F, H and L, but given that these are pari passu with all the other preferred, I don't see how these could be paid out before the other preferreds. The divi thing may be a loophole, but I am not aware of any loopholes that would make these issues senior to the other preferreds...

        But I am interested if there is anything that would indicate this.

        Would appreciate comments on this.

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