Oliver covered this issue some while ago: http://www.investorsintelligence.co.uk/2013/10/27/investec-a-base-rate-linked-preference-share-gb00b19rx541/
The preference share traded at a £4.76 bid price until yesterday, down from a recent-years' peak bid price of £5.10 at the end of last year.
Investec have just announced a new placing of its ordinary shares designed to raise money to buy out its preference shares (both this one, and a Rand-denominated issue) to boost its tier 1 capital ratio, which its preference share capital doesn't help towards towards. The proposed buy back price is £5.70. In anticipation, the bid price rose to £5.45 yesterday.
My question is: should holders of the preference share take up the offer?
The "pro" argument is that the price being offered is more than 10% above the recent years' peak, that Investec's hand is being forced by regulatory authorities, and this represents a good opportunity to cash them in.
The "anti" argument is that the preference share is a unique hedge against inflation, with a yield which is geared at a rate of 2.25x to base rate rises - so for example a rise of 5% in base rate would result in a rise of 11.25% in its yield, i.e. from just over 3% yesterday to over 14%! Such a rise in yield would provide a terrific boost to the share price too of course.
What do people think? Oliver - is this a possible topic for a Bond of the Week?