Bond Of the week request

Any chance of an update on the current highest yielding bonds?

Enquest 2022 12.1%
Eros International PLC 7.5%
PREMIER OIL PLC 7.3%

Comments

  • I would love to get a bit more insight / rationale into the last portfolio rotations as well (unless I have missed it).
  • The Enquest story is a particularly interesting one. Clearly the market doesn't like it at the moment, hence the massive drop in price. The obvious question, therefore, is whether the market has over-reacted.

    One other thought. I notice the Chancellor has slightly eased oil and gas producer taxes in the November statement. I'm not sure what impact, if any, this would have on Enquest directly, but it may signal a willingness to protect North Sea production from short to medium term market pressures.

    An interesting bet. I would be really interested in comments from anyone who is selling this at the moment on why they feel the risks outweigh the rewards.
  • Production costs for Enquest for the first six months of this year were around $35/barrel. However this masks the fact that the total b/cost ( OpEx + finding cost) is around $70.

    http://www.enquest.com/media-centre/press-releases/2014/13-08-14.aspx

    Thus their claim that they can remain viable as long as the average price is above $45 might hold water and with the back stop that CapEx cost of exploration and extraction is re structured/deferred

    A 'left field' thought on this matter is the position of Tom Cross and Parkmead. They are sitting on a hell of a large promissory war chest for acquisitions and alike. Although not a given, I would not be surprised that with the over selling of the stock of other small operators that TC goes bargain hunting in the new year

  • Anyone any idea where can see a price for the Enquest US$ 7%?
    Code is USG315APAB40 but I cant find a price without having to become a premium subscriber on certain websites, ie pay. Would be interesting to see where it trades given this was the subsequent issue that stiffed the ORB retail bond.
  • The Finra website is perfect for checking prices

    http://finra-markets.morningstar.com/BondCenter/Default.jsp

    Just type in Enquest and select corporates
  • Re Eros, on your list Shotgun, under the cosh again this morning . Multiple sales in 50000 and 25000 lots again , after a brief interlude. Off loading ? Who ? Why ?
  • edited December 2014
    Does it matter unless they are going bust?
    Reason?
    Lots of fund managers and "professional" investors are shovelling stuff out of their portfolios on the basis of year end fund figures and the thought that the Almighty Dollar is going for steady interest rate rises over the next year or so to normalise things and to put USA back in the driving seat of being #1 in the world again
    If you are still getting the interest you signed up for, then no worries
  • morgleman2, I agree with all that you say. It just annoys me that there is possibly just one or two organizations unloading who with the volume of deals are creating equity type volatility in a stock which might otherwise be quite boring , and as such could be tucked away as you suggest.
    It is supposed to be a RETAIL bond market.
  • Capucino, thanks for the information.
  • Robin H; the point that you make vis a vis, ‘It is supposed to be a RETAIL bond market’, is a very good one. The problem is, to get issues away in the size that investors ‘want’, we are always told £50m+, you need the institutions to achieve the critical mass.

    The argument we constantly hear is that issues smaller than this will be illiquid. As I understand it the number of actual investors has as much impact, if not more, on liquidity, as the notional. As an example, a £500m institutional issue with 10 investors should be less liquid that a £20m retail issue with 800 investors.

    This is part of the reason for the lack of issuance on ORB when compared to German M-bonds, by this I mean the number of issues not the total notional. Whilst they have not attracted issuers such as National Grid et al, they have succeeded far better in creating access for ‘smaller’ firms, and therefore greater choice and diversification for investors. Possible the number of actual issues makes this market more liquid?

    I know of a firm that has created a MTN program, one of their specific objectives is to allow ‘smaller’ issuers to save costs by ‘renting’ their program rather than creating their own prospectus. Their question is, ‘will the issues be ignored because of size expectations’? This becomes self-defeating as the execution-only venues shy away meaning that investors such as you can’t be accessed.

    Maybe the question should be, ‘do you want to be able to choose the issues you buy, or do you want the choice filtered by the system?
  • We are wandering off shotgun 's original request, but interesting. To me the prospect of a wider more diverse range of bonds is attractive, holding a larger portfolio of bonds in typically £5k amounts , thereby spreading the risk, while securing a return of 5 % net overall.
    I commented somewhere else on how Hargreaves Lansdown, for one, have recently made it a practical proposition to buy and sell in trades of this size, and speculated whether a more liquid market could be secured by placing a ceiling , say £ 50k , on the amount of a new issue that could be applied for.
    Another thought for widening the market might be for the government to raise the ISA annual allowance for qualifying bonds, or provide relief from IHT. The potential for SMEs to raise medium term capital in this way must be of interest to policy makers. Why is there is not a single ' born on ORB ' manufacturer or engineer ?
    The index linked corporate bonds might be more widely taken up if the tax rules applied were the same as for the treasury's 'linkers'.
    Lastly, can we access Germany's M- bond market, individually or collectively ?
  • Re. the M-bond market.
    Found this website (in German). http://www.bondguide.de/bondguide/
    If your German is a bit rusty, the Google translation is readable.
    It gives an outline of the principles of M-bonds. I can't find a good source for trading yet.
    On the face of it, there appear to be some attractive yields on the new issues - no idea of the background.
  • Along with the link shown above, all the bonds available are listed here http://www.bondinvest.eu/ ; while there is also a good reference guide to be found at http://www.anleihen-finder.de (The former link has an english page while the latter you will need to rely on your browser to translate.)

    A couple of years ago I looked into buying German SME bonds and drew a blank. There are I believe a couple of ETFs that do exist, but I cannot remember who they are offered by. TD Waterhouse et al, base out of Luxembourg also appear not to list these

    I know of one German broker ( flatex.de) that is happy to have non domicile account holders but the online trading is in German only and non dom registration did require a bit of a rigmarole to get established. ( If memory serves it needed a confirmed address to be provided and notarized.)
  • Re Bondguide: some of the prices/yields indicate extremely high risk. There's a bond there with a price (Ger: Kurs) of 0.02 and a yield (Ger: Rendite) of 1,148.91% and there are a number of others in the same ball park. Some also with yields of several hundred percent, alongside more normal yields.
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