Genesis Capital Bonds

[Waiuta]

The instrument notation of 'unsecured, subordinated, redeemable, cumulative interest bearing capital bonds' seems to be quite a mouthful.

I haven't seen any broker recommend it other than highlight the basic points and GE's performance and plans for the capital raising.

Perhaps they are all frightened of the new financial advisor's regulations and want us all to come to our own conclusions but still indirectly pay their brokeridge.

I think it's a good offer and will be taking it up.:)

[POSSUM THE CAT]

Waiuta To Many fish hooks If interest rates go up theymake you wait Thirty years to get your money & if the go down they pay you out whenever they can. Have not looked at fine detail yet. But I think it will go in the Trash Can

[Sideshow Bob]

In todays ODT, Genisis are saying after a book build process, there will be no public allocation. So thherefore suppose only way to get them is through Craigs/ANZ/Westpac/Forsyth Barr/First NZ capital

[CJ]

Thirty years to get your money & if the go down they pay you out whenever they can. And they have been given a junk rating.

I am pretty sure I read one article saying not to touch them - Was it a Gaynor article? he normally calls it like he sees it.

[Penfold]

I am buying a small parcel...

I am happy the term sheet and feel they are priced attractively/fairly. There are always some hooks, but these don't seem too bad. There are step up margins in place and the fact it reprices of the 5 year swap means it is unlikely to follow the likes of Rabo's pref shares down to $70 (which reprice off the one year).

I also feel Genesis are unlikely to go bankrupt anytime soon. I saw the BB- S&P rating. I suppose it is a reflection of their subordination (they are very close to equity in nature so BB- is probably quite good). I prefer to focus on the BBB+ rating of Genesis.

I couldn't find any comment on them from Gaynor or any other media types. I found the link below, but I would take it with a pinch of salt. Sounds like it was written by a broker...

http://www.depositrates.co.nz/news/976498098/opinion-are-genesis-energy-s-capital-bonds-worth-buying.html

Would be interested to hear the views of any FI/pref share experts out there.

[p2r]

Chris Lees website has a bit about it in taking stock & market news. 7-10 April. He thinks it is a pretty good addition to a portfolio and would be unlikely to go beyond 10 years

[POSSUM THE CAT]

P@R If Criss Lee recommends them surely that Means donot touch with bargepole For anyone with some Nouse

[tim23]

Gee Possum thats a bit harsh - reads like you had a few though!

[POSSUM THE CAT]

Tim23 No I had never bought any SCF or Hanover got out of Strategic when Finegan from Hanover went there & they were wanting you to renew well in advance of maturity at premium Interest rates & a prospectous with no mention of change of Management.
18 Months later I heard of Chris Lee& he was still recomending all three. Despite news paper talks about a big hole in the ground in Ponsonby financed by Strategic. Had a look at SCF is prospectous & the number of inter party deals & loans was enough for someone with two years Secondry education. Had one meeting with a financial planner complements of Westpac Bank & he was a bigger idiot in my opinion than Chris Lee & that is really saying something. All the financial planner paid by Westpac as a bonus to business clients was how much commision he would get. I asked him for some idea of what he would do for us. In other words some idea of expertise. So he sent us a pile of prospectous & nothing else. So my reading of recommendations & investments advice from Chris Lee's web site. I thought he was just about as big of an idiot as the man from Westpac. These Are just my personal opinions.

[Waiuta]

Well, there are some interesting replies and apart from doing your own research and listening to others you've still got to take a bit of a punt. And that comes down to how you manage the risk. Advisors are increasingly gunshy and more and more being guarded about any recommendations other than Government Stock.

[Xerof]

If it looks like equity (and S&P seem to be able to count it as equity) it bloody well might as well be

If that's the case, it's badly mispriced, and once again the investing public are ripped off by the broker community

I'm out

[karen1]

Interesting read: http://www.interest.co.nz/news/52976/genesis-seeks-nz275-mln-equity-junk-bond-issue-help-fund-nz821-mln-purchase-tekapo-power-

[Penfold]

I see today that Direct Broking has exhausted their allocation to investors. With the 5 year swap falling, the margin looks set to be close to 400bps.

[CJ]

I see today that Direct Broking has exhausted their allocation to investors. With the 5 year swap falling, the margin looks set to be close to 400bps.They must be able to get cheaper funding than that. They are effectively govt guaranteed so why dont they borrow via the government (or is the govt already borrowing to much - dont want to get into this arguement on this thread).

[POSSUM THE CAT]

CJ then they could not float it

[sharer]

The earlier sceptical comments above seem to have been right.
GPLFA have been effectively withdrawn, or else re-issued at max 5.8% .
My trust fund has decided to sit tight for the repaid capital.
There seem to be several likely upcoming opportunities this year for alternative reinvestments.

[BIRMANBOY]

2 years of 8.5%......good use of money and no loss.
The earlier sceptical comments above seem to have been right.
GPLFA have been effectively withdrawn, or else re-issued at max 5.8% .
My trust fund has decided to sit tight for the repaid capital.
There seem to be several likely upcoming opportunities this year for alternative reinvestments.

[Xerof]

Heads they win, tails you lose. Another dreadful example of treating their financiers (you guys who bought these) like 'flys'


Giving up 8.5 for 5.8 looks a really good deal.....for them

pity anyone who bought on the secondary market at a premium, they will only get 100 cents back.

[BIRMANBOY]

As I said we have had 2 years of 8.5% and are getting 100% of our capital back.....so dont know how you could call it dreadfull unless you are somehow trying to compare it to something ?else. People who buy bonds want security and give up the idea of "large" growth and gains. It did what it said it would and I for one understand what they did as per prospectus. Since TD were/are paying 4% plus minus 8.5% is a great return. You have the option of renewing if you want but my guess is most holders wont and will cash up. Buying on secondary market is a bit riskier but if you buy at the right time sometimes you can get a better buy...its like shares...theres always a bit of a timing issue. Buying at onset has never been bad for me. I'll finance anyone as reliable as an energy anytime willingly..especially at that rate. You cant blame them for wanting to control their debt costs. Thats why they have teams of lawyers and finance wizards write these prospectus.
Heads they win, tails you lose. Another dreadful example of treating their financiers (you guys who bought these) like 'flys'


Giving up 8.5 for 5.8 looks a really good deal.....for them

pity anyone who bought on the secondary market at a premium, they will only get 100 cents back.

[Xerof]

So you are happy to lose your 8.5% running yield? Where do you plan to reinvest in a similar risk instrument and achieve 8.5%

How do you think those who invested in these bonds only 6 months ago are feeling, having paid $1.05 to $1.10, only to have them repaid early for $1.00?

I realise its quite within their rights to take this action, but it is just another kick in the guts for the retail investor (accepting you don't seem to be aggrieved by your loss of income stream)

[winner69]

Xerof - not the best look is it, ESP for the retail investors

The same investors who be flooded with shiny prospectuses and glitzy tv ads asking them to front up in an IPO

[macduffy]

I'm with BIRMANBOY.

Can't see what the fuss is about. Genesis is only exercising its rights and can't be expected to pay more than the going rate for funding. And anyone who bought on market 6 or 12 months ago was, or should have been aware, that the bonds were subject to re-pricing and that interest rates were low. At least holders have the right to redeem, unlike many perpetual, re-pricing issues.

[BIRMANBOY]

I would have preferred it to run forever...however recognise that they would be fools to keep paying 8.5% when cheaper options were available. Its a big world out there..lots of options for getting returns....but NOT at a safe 8.5% so I do what every pragmatic investor does...look for the next best available safe option and move on. In the meantime I thank them for their contribution. As for people who bought without weighing options, reading the prospectus and paying the added costs on secondary market I say thats a relatively inexpensive lesson to learn since they got most of their money back plus have had 8.5% interest.
So you are happy to lose your 8.5% running yield? Where do you plan to reinvest in a similar risk instrument and achieve 8.5%

How do you think those who invested in these bonds only 6 months ago are feeling, having paid $1.05 to $1.10, only to have them repaid early for $1.00?

I realise its quite within their rights to take this action, but it is just another kick in the guts for the retail investor (accepting you don't seem to be aggrieved by your loss of income stream)