BBYB

After the REA pref discussion, decided to look at other prefs. BBYB looks very interesting. Redemption date in 2020 but even if you take that into consideration and think of it as a bond redeemable in 5 years time, the yield looks very healthy to me. Am I missing something?

Comments

  • Last I heard of Balfour Beatty they were issuing a seemingly never ending stream of profit warnings but just looked them up again and things seem to have taken a turn for the better

    http://www.iii.co.uk/articles/247199/chinese-mull-bid-balfour-beatty

    Presume if this is redeemed in around 5 years time yield would be around 7% ?

  • I used the yield calculator on this site 10.75%, maturity July 2020, current price 118. That gives a yield to maturity of 6.2% and running yield 9.11%. Bearing in mind the yield on retail bonds, that seems pretty attractive.
  • These pay net at the moment, so 9.675% rather than 10.75. At least until next April when the Associated Tax Credit is withdrawn.
  • For prospective holders, and indeed any current holders that may not be aware, current info on these can be found at

    http://www.balfourbeatty.com/investors/shareholder-centre/preference-shareholders/

    I will be pleasantly surprised if BBYB, together with SAN and SANB, start paying "gross" dividends next year

    007
  • Triceratops,
    I therefore assume that having a few "preference shares" within a diversified SIPP / ISA portfolio would become more "beneficial" from April 2016? (as dividend / coupon is paid gross).
    Would appreciate any comment, many thanks.
  • I have a handful of these. BB’s Articles say “at such a rate p.a. as with the addition of any tax credit… for UK tax purposes…would result in a gross rate (inclusive of such tax credit) of 10.75%”

    Its clear the payment amount varies with any tax credit. As there is no credit from April they should pay the full 10.75%
  • "I will be pleasantly surprised if BBYB, together with SAN and SANB, start paying "gross" dividends next year"

    Hmmm - me too but has anyone actually got a proper response and confirmation from any of these companies? I've emailed Capita Registrars re BBYB today so will let all know what, if anything, they have to say on the matter. As far as I'm aware, Santander (I also hold some of their prefs) has avoided answering the question.
  • For those who are worried don't forget that there is already a precedent: the dividend tax credit used to be 20% and was cut to 10% in c.1999 and this is reflected in the calculation of the dividends for these securities. BBYB was issued on 31/12/1994, SAN 10.375% 1995 (by Abbey National) and I think SANB is a similar vintage so if you can find their dividend payment histories you should see when the change in calculation occurred.

    From Santander's, "Preference Shares and Loan Notes Santander UK plc Sterling Preference shares" webpage:

    "Why is the gross rate quoted when other preference shares quote the net rate? If the associated tax credit were withdrawn, we would gross up the dividend. For this reason, we quote the gross rate on the shares."

    It shouldn't be a problem. (Famous last words.)
  • Thanks Willem.

    Hard to see how Santander might wriggle out of that one. Probably worth taking a screenshot of that (I just have) in case they should decide to change their webpage.
  • Yes - thanks for that Willem.

    Good idea Laughton - I will do the same

    As for wriggling out - Santander could ask Lloyds about that, they are well known for wriggling out of things (well, trying at least)
  • So, I said I'd let you know what Capita Registrars's response was so here it is:-

    "your shares are held in a nominee holding, please contact your nominee provider with any queries regarding your future dividends".

    Unbelievable.



  • No surprise for me- they couldn't even find me a copy of the BBYB prospectus so I got that from elsewhere.

    Registrars are now on my list together with auditors, estate agents,freeholders of blocks of flats who milk their leaseholders, British Gas etc etc

  • Perhaps the experts "Canaccord Genuity" can help to answer the question!
    Their web-site
    "For more information, please contact Rik Edwards, Head of Preference Shares & PIBS"
  • They may well be able to help - they were the ones that obtained a copy of the prospectus (referrred to above) for me
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