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The Royal Bank of Scotland Group plc Message Board

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  • rexobXIP rexobXIP Nov 10, 2009 2:32 PM Flag

    Preferreds - Pricing Differences

    I remain perplexed by the discrepancy between pricing on the Various RBS preferreds. The spread between H and T is now equivalent to more than 2.5 years of dividend suspension. Given that the presumption is that a 2 year suspension is now anticipated and that the T is more likely to be suspended than the H, the difference between the shares ought to be some discounted price to 2 years of suspension (or $3.60).

    The $3.60 anticipates 100% certainty that the Hs will pay a divi and a 100% certainty that the Ts will not, for the next 8 quarters. Neither of these is a 100% certainty. Additionally, there are lawsuits surrounding the Ts that claim RBS knew they were in trouble at the time this issue was first sold, so there is a possibility (albeit slim) that they will maintain the divi on these, or offer some form of redemption (that they would not be obligated to offer on the Hs)

    In recent RBS releases it still indicates that these shares are Pari Passu, and in the event of a liquidation would be treated equally (anyone see language to the contrary). I guess if the Hs were senior to the Ts this might justify additional value, but I am not seeing that. So in the event of a liquidation over the next 2 years - holders of H shares wouldn't even recoup the full $3.60 speculated on above.

    I concede I am not very sophisticated on the fine points of all these offerings, but ultimately I guess most people, including brokers or bankers are not either, or else so many (the vast majority) would not have been caught flat-footed by the banking and market collapse of 2008-9.

    Please tell me what I am missing.


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