NTEA

[OldBoyReturns]

What was the market price of the Tate & Lyle when they were cancelled? Were holders compensated?

Here you go:

https://www.tateandlyle.com/sites/defau ... eeting.pdf

Resolution 22 on page 6 plus Explanatory Note on page 7. Coupon was 6.5% and return of capital was at nominal value plus payment for accrued dividend with no additional compensation as far as I can see.

[88V8]

What was the market price of the Tate & Lyle when they were cancelled? Were holders compensated?

...no additional compensation as far as I can see.

No.

Looks as if they were trading around ten points above par pre-announcement.
Probably few holders and not worthwhile for them to make a fuss.
As you say, it does illustrate that the possibility is not totally off the table.

V8

[NealMorris]

So NTEA, another dodgy one then

[hostye]

So NTEA, another dodgy one then

Only dodgy if you fail to read or understand the documentation!
I would think the repayment at par clause was originally inserted to give investors comfort they would likely get their money back if the licence was lost (essentially a back stop bid).

I suspect any attempt to re-nationalise would entail some degree of fairness towards owners/shareholders etc and I can't see Berkshire Hathaway rolling over too easily to accept a below market value offer from the UK Government. They will want at least fair market value. Could get messy but I reckon I know who has the better lawyers!
Looking back at some old notes Berkshire Hathaway owned 69% of the pref and 92% of the equity (possibly this could have changed but unlikely by any significant amount).

At current prices the market is pricing in this uncertainty/risk in my opinion.

Also worth reading Ofgem's terms of revoking licences here
https://www.ofgem.gov.uk/publications/e ... conditions.

[Swanmore22]

Tks all for posts

I have bought a few NTEA recently
Ok with the "risks" of licence revocation and renationalisation.
OK with BERK as co shareholder.

The pref"s were issued to ordinary shareholders as a sweetner to prevent a take over by Trafalgar House in 1995.
I assume the 69% parent holding was acquired post issue by the brokers.
Is there any benefit to BERK / BHE keeping the prefs alive ?
Could it be tax treatment of dividends ?
Not sure, but if they wanted to tender then the current price would be an attraction.

"Bonus issue
The other component of the immediate shareholder package is a bonus issue of one preference share per ordinary share held.
Each preference share will have a nominal value of 1p paid up out of the company's share premium account (one of the few uses to which this reserve can be put (section 130(2), Companies Act1985)).
The preference shares will be listed on the London StockExchange and the rate of interest has been calculated to give the man intended value of £1 on issue. BZW and Schroders(Northern's brokers and financial advisers respectively) have made a cash offer to purchase the preference shares at or above this price on issue.
The main advantage of the bonus issue is that shareholders receive securities worth a further £1 per share without any immediate reduction of the company's cash reserves. No tax will be payable on issue because it will be treated as a reorganisation of share capital. But shareholders may be liable to capital gains taxon any subsequent disposal."

Swan

[Jwdool]

The FCA were worried about market abuse/ disruption. It seems T&L were pretty close to par - so the cancellation wasn't going to cause too much fuss. I don't believe NTEA would be in quite the same situation if they were trading ~15-18% above par and called. Although they may technically be allowed, as far as I understand things, it would still need to be voted through. The majority holder of the NTEA prefs is unlikely to consent (Buffett) given the underlying ownership structure. I'd say these were pretty safe, but recognise the tail risk.

[Swanmore22]

Tks Jwdool

These should be around for sometime.
I buy income with the intent to hold for a long time, possibly to pass on.

Swan

[Swanmore22]

BP A was bid in good size this am @ 144.
An aggressive bid , as I could still buy at 143.70.
NTEA , meanwhile, offered at 117.30.
This the widest spread has been for sometime.

Swan

[Jwdool]

NTEA is 116p bid at IBKR in >15k FYI

[Swanmore22]

Tks Jwdool,

I have been active in NTEA over past few months.
Mostly buys. Liquidity on line is good. 116.92 bid to 117.29 is the spread this am.
I can sell 50,000 shares at 116.92 and 100,000 at 116.60. I can sell more in one clip, 150,000 at 116.00
I can buy 50,000 at 117.29. All via platfform at AJBell.
Via my full service broker i have been able to get inside the spread in 50k clips .
So liquidity is good.
Given BP A is 144 bid for good size ,then NTEA looks good value if we put any faith in their historic relationships.
It maybe the recent debacle in Thames Water has "tainted" utility debt ?

Regards

Swan

[hostye]

Just taking another look at NTEA. Seems that these have been under pressure over the last 6 months or so due to fears of a Labour government and nationalisation threat.

From what I have read it seems to me Labour have gone off the idea of nationalising energy and now have plans such as GB Energy etc. In any case I am not sure they could simply revoke the supply license without some degree of compensation to shareholders

Electricity supply companies need to fall below certain standards before Ofgem can revoke the license is my understanding. I dont see any ability to revoke due to nationalisation.

Ofgem's terms of revoking licences can be found here
https://www.ofgem.gov.uk/publications/e ... conditions

Would be interesting to know other peoples thoughts but by my calcs these are circa 7% yield at current offer price of 117.65. Now one of the cheapest prefs out there in my view, and they are cumulative too. Its where my RSAB proceeds will be heading!

[kltrader]

Seems like NTEA's preference shares are holding steady with a decent yield despite past concerns. I've asked Norther Powergrid for more details, but if cancellation isn't likely, these shares could be a solid buy, potentially comparable to BP's offerings.

[hostye]

Seems like NTEA's preference shares are holding steady with a decent yield despite past concerns. I've asked Norther Powergrid for more details, but if cancellation isn't likely, these shares could be a solid buy, potentially comparable to BP's offerings.

I very much doubt you are going to get any confirmation from Northern Powergid.
Given Berkshire Hathaway own circa 69% of the prefs I suspect they are very happy to keep that dividend coming in but obviously with such a large holding then they can pretty much vote to do whatever they like especialy when you consider they own circa 92% of the ordinary share capital too. They may even tender at a higher price for the prefs if that suits thier tax situation etc.

I dont have a crystal ball but am taking a very simplistic view here - if you get 2 more years of dividends on these thats worth 16 points (2x 8.061 = 16.122)

So if these exist until March 2026 then you are essentially in at very close to par and unlikely to lose money unless they go bust etc (seems unlikely)

Theres no such thing as a free lunch but everyone has different risk perameters. Im happy with that risk and my downside seems well protected at par.

If they continue to exist for another 10-20 years or so (which I think is likely) then I will be happy clipping a 7% yield in return.