While the target of 12% is based on the new preferred issue, old preferreds yielding 12% would still be trading at little more than 50% of par. How much of a premium is a potential 70-100% gain at redemption worth relative to the new issue?
The govt pref shares will always be worth the same. They just recieve 12% until they are paid back. So, they wont make the capital gain on the stock like us regular holders, just the dividend payments. Their investment in the common shares is where they can make some $$$ back for the taxpayers if it goes above 65.5 pence.
That is the real beauty in the preferreds. They are equal to the govt pref and as long as they get paid 12%, RBS preferred stocks will get their div. When the company does pay back the govt shares, they will be in a much stronger position and will have no problem paying dividends, even the common.
If I was RBS, instead of calling these pref back in the future for $25, I would start buying them off the open market at the discount and save as much as I could. Of course they dont have the cash right now to do any major cash transactions until things calm down. Although, with the UK 58% stake, they could print all the money it takes and save a bundle in the future.
Nobody seems to realize the value of these stocks as their yields are so high. At this point, the pref stocks seem stable with div to be paid as usual. So much upside with very little down. You get paid a very nice premium until the stock rises to the point you want to sell or they get called back. Who cares if it takes 3-5 years as long as the div gets paid!