Bluestar Group (BLU020)

[Alan3285]

*sigh* - I am perfectly well aware of the price paid ... I paid for the capitalised interest ... it was included in the price defined by the NZX calculation.

Okay - but is it capitalised interest up to Dec 2009, or does it included capitalised interest subequent to the date that BlueStar stopped paying out the interest, into 2010?

Thanks,

Alan.

[Enumerate]

Dealing in fixed interest seems to be a very manual process with my broker.

I think you should get a quote from your broker to clarify the issue.

[Alan3285]

Dealing in fixed interest seems to be a very manual process with my broker.

I think you should get a quote from your broker to clarify the issue.

Forgive me if I am being stupid here (it is not uncommon), but either you know what you paid for the bonds, and what interest (and from what date) was accrued and paid for at the time of the purchase, or you aren't sure?

Are you saying it is the latter? If so, that's fine - I didn't mean to sound like I was having a go or anything.

Thanks,

Alan.

[Enumerate]

From thread response #16 ...

Please verify with your broker - I cannot easily check my broker statements for fixed interest transactions (they only provide paper statements and all the paperwork is a the accountants).

I can, however, reconstitute the transactions from the online bank statements and the registry documentation. Here is a list of prices (per bond transaction) in 2010:

Jan 35cents
Feb 41cents
March 41cents

Haven't bought any in April.

From memory, these trade figures were identical to the NZX formulae (trades at 75% down to 64%, from memory) ... if you look up the price on the NZX, this, in my view, is what you pay.

[Contrarian]

Yes, but you don't know whether you paid for the accrued interest or not!?

Makes quite a big difference to the investment.

Alan.

Gidday
I think Alan is trying to find out if the NZX calculator knows that the previous interest has not been paid & has componded & capitalised the interest. I don't think the calculator or NZX have the capacity to recognise interest that is quietly compounding, it is all set up for the ideal world where people pay their bills.

See the paste of a contract note below, the interest seems for the current period, rather than say $1,500 (10% say for a year on 15k) OR has the unpaid interest been rolled into the capital value, I'm just guessing it hasn't.

But then again I could be wrong. As Enumerate points out you can get the dollars per hundred quote as well from NZX.

I remember a quote, "There are those who understand compound interest, and those who pay it" I suppose we are trying to identify & quantify it.

SECURITY:
WE BOUGHT ON YOUR ACCOUNT -
Blue Star Group Limited
Subordinated Bond - BLU020 15-Sep-2012 13.10% Quote Bases CI
Representing 15,000 @B60.0000 %UY
15,000 @ 60.0000 % Capital Value 6,214.34
Accrued Interest 53.40
Settlement Price 6,267.74
Brokerage 31.34
Trade Fee 5.50
Total Cost NZD 6,304.58
Settlement Date 25-Mar-2010
Order Completed

[Contrarian]

Gidday
On Direct Broking & I think NZX there are fixed interest calculators you can play with, may prove or disprove theories. I just think 42 cents in the dollar, plus the chance of a windfall of the compounding interest seems like a good deal, Until it all goes T*ts up ;-)

[Enumerate]

It is clear you paid the NZX amount per $100 on the date of interest capitalisation - 15 March 2010 and then paid the interest due up to settlement date (non-capitalised interest).

[Contrarian]

From 15 September 2009, interest has accrued on the Capital Bonds at the
step-up interest rate of 13.1% per annum. Interest accrued at the step-up
interest rate is calculated on a compounding basis at quarterly intervals
until the suspended interest has been paid. The suspended interest is not
capitalised to become principal.

Gidday

I THINK this tells us the accrued interest is sitting in left field quietly compounding & the fixed interest calculator denies its existence, which as a buyer is a bonus. I was wrong in my earlier guesstimate re the unpaid interest on $15k, it's more like $982.50 (+compound) after 6 months.

[Enumerate]

Remember, the September payment was the first payment missed.

On 15,000 ... I reckon you have accrued interest of $1,362.56 (September, December and March). This is the miracle of compound interest.

The suspended interest is not capitalised to become principal.

However, it is capitalised for the purposes of the NZX rate calculator. At the beginning, I was buying BLU020 at 75% and was paying less than current prices at 85%. So, I reckon that the interest is being capitalised, for the purposes of the calculator - but will become due as a cash payment rather than capitalised as part of the principal.

[Alan3285]

Okay, this is what I found.

If I go to the NZX site, and check the current buy / sell offers, they are:

74% yield offers $31.156 per $100 nominal

61% yield costs $42.912 per $100 nominal

If I bang that into my trusty calculator, those figures assume that there is no accrued interest from prior periods (specifically the Sep 2009, Dec 2009, and Mar 2010 interest payments), but they do use the higher rate of 13.1% (the step-up rate).

So, Enumerate, if you paid exactly what is shown on the NZX site when you acquired your bonds each time, then I submit that the accrued interest from prior periods is entirely a 'bonus' on top of what you paid since you haven't explicitly paid for that accrued interest (ignoring the fact that the market bids / offers should take that into account implicitly).

Alan.