Comments

  • I'm quite surprised the PIBS have been trading quite so high this last year.

    Oliver did a great write up on them some time back which I seem to recall caused quite a wobble in the price but since then they have crept back up.

    IMHO It's just a matter of time before they are taken on by one of the bigger mutuals but there is far too much risk in the PIBS to justify the current 7% yield. I wouldn't touch these unless they went far lower to compensate for the risk of a significant haircut.
  • Yep , it does seem nuts these are on a par with BOI 13.375 s
  • I wonder if they paid out the intrest on the 13 th april. The next day or so may see a stampede and back down to sub 75p Cetainly dodgey at present price
  • Yes they did pay the interest on the 13th April
    Difficult to know what is happening at the present moment
    Suspect a further addition of Profit Participating Deferred Shares (Nationwide?)
  • I do recall the Oliver Butt article - this created a unique buying opportunity which I was happy to take advantage of. The price of both the 8% and the 6.75% recovered very strongly and very quickly. The following thoughts spring to mind...

    1. Both the 8% and 6.75% are tiddlers in PIB terms (£10m and £5m respectively)
    2. The 2015 figures are painful but the Building Society continues to make an underlying profit
    3. I cannot recall a BS being allowed to go "bust" (ie...could Nationwide step in) - if so, the PIBs will continue to be paid

    There is also a PPDS scenario (similar to WBS) but that was a £75m issue. The 2015 annual report is fairly candid but I agree with Shaunm...difficult to judge this one. It certainly creates a buying opportunity in a very expensive sector (possibly).


  • Even at 60 to buy today only just over 11 per cent , not enough
  • This is from the report and accounts published yesterday:

    “Further to the announcement on 18 March 2016, the accounts for the year have been prepared on a going concern basis of accounting and, as expected, set out a "material uncertainty" regarding the long term future of the Society. Accordingly, there are ongoing discussions with the Prudential Regulation Authority ("PRA") and other stakeholders regarding the development of a plan to secure the future of the Society and its strategic direction.”

    What actually happens is a guess; you might even find a larger Society such as Nationwide takes them over and you have a much better quality risk. Or they might not. And you have a Dunfermline situation (assets to Nationwide, subordinated bond defaults). From a credit perspective judged purely on the economics of the Society, however, it is a rubbish credit.
  • Bond007,
    Many thanks for the tip-off yesterday, very much appreciated.
    Managed to exit at 88, and still have a reasonable capital profit for holding them for 2 years
    (original purchase average 77).
    I should have perhaps sold them earlier, as Oliver indicated "rubbish" credit.
    However, like the "Waste Management Industry" there's money to be made from some "rubbish", but timing & "limiting one's risk" is important.
    Important to re-access risk (I failed)!), even if pricing improves! (when to exit?)

    Not adverse to going back in if the potential rewards make it worthwhile.
    What happens to the PPDS holders, who I assume were arm-twisted to take their original holding? Make sense for them to double their holding so that the Society can "lend" again.

    Some good news may hopefully arise (even for their staff who must have had a bad time over the past few years).

    ps, Thank you Oliver for above comment, much appreciated
  • Shaun,

    I follow Mark Taber on Twitter and it was he who referred to the article, so really its Mark - yet again - who should take the ultimate credit. He has subsequently posted his thoughts on The Motley Fool Banking Board), which are well worth a read

    I posted the link as I was surprised that no one else had spotted it.

    I am so very glad you managed to sell and still make a profit

    007
  • These things have a tendency to snowball and, now the press is widely reporting the problems, I'd say they have weeks rather than months to sort out a bail in and/or merger with another society.

    Does anyone else have a view on what happens next? particularly how low the PIBS may fall?

  • I see the prices of the 8% and 6.75% have started to rise a little over the past week or so; quoting 67p and 51p respectively. Any body any news / thoughts on these now. I think the 6.75% got down into the as low 40s.
  • Oliver did a good write up on the Manchester PIBSs back in May 2014.
    It was a clear sell - do not hold message
    http://www.fixedincomeinvestor.co.uk/x/analysis.html?type=bond-of-the-week&cat=analysis-comment&y=2014&aid=1269

    Investors were warned!
  • Hmmm - thanks for the heads-up.
    Being contrarian (some would say stupid) I think I'll have a closer look at these.
    A 6.75% PIB trading at 31p. That sounds a good start to me.
  • Laughton,
    If others do the same and take a bet, then you may perhaps make a capital gain.
    You may however buy after the security has gone "Ex-Div", otherwise you will be paying interest on the purchase, but then not getting any interest from the Society!
  • They've already gone "ex div" in the sense that MBS have indicated that they won't be paying at least the next coupon.
  • Does that mean when you buy the security, the broker will now not add interest to the purchase?
  • I'll let you know for sure should I push the BUY buttoin but yes, I expect that to be the case.
  • Seems they have quite a lot of Spanish property backed mortgages so for anyone that's in the least bit interested (and you shouldn't be) I decided against buying this.

    Already holding too much high risk paper (Eros, Enquest, Co-Op Bank, Raven Russia etc.).
  • Laughton, wise decision
    From memory, much of the Spanish Property is based upon "Equity release", where the loan is only re-paid when the person dies, the big question for the Society, will the property be worth more or less than the loan? and when will the person decease, 5, 10, 15, 20 years from now!
    Not an ideal business model - too many unknown factors, although in the end (10 or 20 years time) it could be highly profitable!
  • The Times is reporting that Nationwide BS is not minded to come to Manchester's rescue this time. I have had a number of calls from journalists and investors as a result.

    I have done a write up with thoughts on how the situation could be resolved at - http://www.fixedincomeinvestments.co.uk/boards/

    and would be interested in hearing the thoughts of PIBS holders.
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