I respect the boards of both HNZ and DPC. Both companies have had large capital raisings since the GFC (in fact HNZ was created by a large capital raising out of PGC). Since 2011 I don't think either board has put a foot wrong. HNZ I think has perhaps faced the most difficult transition as they unwound their difficult property portfolio. But as of FY2014, I would say both companies are on track.
I guess DPC has a residual cloud of doubt to overcome, as a survivor of the NZ financial sector meltdown. But it is transforming into quite a different business compared to what was there before. Maybe those entrepreneurial people on the DPC board are helping here?
Heartland has a BBB credit rating which, on average, means it might fail within 30 years. Or looked at another way it has about a one in five chance of failing in the next GFC.Quote:
Whose money is at risk in the DPC bond offer?
There will be another crash some time. They seem to come around every 10 years or so. The last one was in 2008. How would this company do in a crash?
Dorchester has no rating because it no longer takes public deposits. The insurance arm of Dorchester has a rating of B+. So if Dorchester did have a rating it would probably be lower than Heartland. To make up for this Dorchester has a higher equity ratio though.
The other thing I like about Dorchester is the bad debt recovery business it does for the major banks. Perversely the more bad debts start to rack up at the major banks, the better for Dorchester's debt recovery business. So Dorchester has a natural hedge in their business model if the economy starts to go bad.
As for whose money is at risk, I have niggling doubts about all the second tier finance companies. This is why I favour converting some of my TUA shares into DPC bonds. As a bondholder I can watch from outside the tent for a couple of years. If I don't like how DPC is progressing then I will redeem my bonds for cash. If I like how DPC is going I can convert to shares in two years. My DPC bonds will be paid back before shareholders capital if DPC does run into trouble. But as you have assessed Bunter, the bonds are not a totally risk free investment.
And no doubt you made a tidy profit and have since reinvested. Me, I will wait until that independent TUA valuation report comes out before I make my final decision.Quote:
FWIW I sold my TUA on-market at a small discount to the net offer price two weeks ago - for a sure return.
SNOOPY