Heartland Subordinated Notes

[Grimy]

Just had an email from Chris Lee & Partners.
Heartland Bank Limited (HBL) has announced that it is considering an offer of subordinated notes. 10 year (possible repayment after 5) around 7%

[Recaster]

Don't like the sound of 'subordinated'.

[Nor]

Don't like the sound of 'subordinated'.

From interest.co.nz re Heartland notes

"These bonds are the first to be issued by Heartland under the RBNZ's recently revised regulatory capital framework, which prohibits non-viability triggers for capital instruments"

Just what does this mean? Does prohibiting a non-viability trigger mean prohibiting Bonds that are behind shares in ranking (in some or all circumstances) as in the Credit Suisse case recently?
Or wot?

[Nor]

I think that's what it means. I think it's wrong that a lot of regulatory information of interest to or even required by the ordinary investor seems to be hidden from them. Is it only made available to the professionals, eg accountants?

[Nor]

I think that's what it means. I think it's wrong that a lot of regulatory information of interest to or even required by the ordinary investor seems to be hidden from them. Is it only made available to the professionals, eg accountants?

From
BPR120 Capital Adequacy Process Requirements:
"Guidance: Non-viability trigger events are not applicable to AT1 and Tier 2
capital instruments issued on or after 1 July 2021, under the revised capital
adequacy framework in force from that date."

[Recaster]

If I need to figure out what it means, I'll stay away.

[Nor]

Seems to me to mean that interest.co.nz's definition of recent is different from mine in that the change occured nearly two years ago.
I've only become interested in Bonds recently, as an alternative to TDs, because while TD rates are high at the moment they can quickly come down again whereas bonds are fixed atleast for a number of years.
Also if one took a long-term TD to lock-in the rate and then wanted the money sooner one would have to ask nicely (grovel) and still might be refused.
A bond preserves access, at the risk of some loss of capital.

[GTM 3442]

You can, of course, do both bonds and Term Deposits. I know I do - the Term Deposits are useful for filling in the missing rungs on the bond maturity ladder.

[Nor]

You can, of course, do both bonds and Term Deposits. I know I do - the Term Deposits are useful for filling in the missing rungs on the bond maturity ladder.

I've avoided bonds for the last many years because the interest rates were so pathetic. As someone who presumably invested in them through those years aren't you well down on what you paid for them?

[GTM 3442]

I've avoided bonds for the last many years because the interest rates were so pathetic. As someone who presumably invested in them through those years aren't you well down on what you paid for them?

At it's simplest, I buy at time of issue and hold until maturity. A buck goes in and a buck comes out. And I get paid interest along the way. And yes, I have some unrealized/paper losses along the way - which vanish like mist on a sunny Taranaki pasture come maturity.

As for the pathetic interest rates of recent history, there was money to be made selling LGF120 (1.5%) into the 2020/21 secondary market. And by buying OCA010 at >7% for about 83 cents on the dollar more recently.

Bonds are just as complicated as shares, but in different ways

[Nor]

At it's simplest, I buy at time of issue and hold until maturity. A buck goes in and a buck comes out. And I get paid interest along the way. And yes, I have some unrealized/paper losses along the way - which vanish like mist on a sunny Taranaki pasture come maturity.

As for the pathetic interest rates of recent history, there was money to be made selling LGF120 (1.5%) into the 2020/21 secondary market. And by buying OCA010 at >7% for about 83 cents on the dollar more recently.

Bonds are just as complicated as shares, but in different ways

Well, yes, I'm not afraid to admit you probably have far more experience with bonds than me.
Can you answer this question - when filling out form IR3K Sale or Disposal of Financial Arrangements, and one comes to step 7 where one has either a profit or loss and it says to include this figure in the other income box of your IR3 - does this really mean that the IRD will allow losses on bond transactions to be deductable for all? When in contrast losses on share transactions are only deductable for traders.

[GTM 3442]

Pass. Sorry, but I have no idea - my accountant does that for me,

[Recaster]

Almost zero real income return at current inflation rates plus capital risk. No thanks.