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Thread: Mtfhc

  1. #1
    percy
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    Default Mtfhc

    Motor Trade Finance Perpetual Bonds.
    Size of issue $40mil.
    Face Value $1
    Coupon rate $6.26
    Dividend Reset date,30th September annually.
    Dividendend Rest Margin,2.40%, including full imputation credits,above the Benchmark Rate.
    Currently trading at 70 cents.giving a net yield of 8.94%.
    Illliquid? Lately liquidity has been good.
    Risk.These bonds are behind all secured and unsecured creditors,but ahead of shareholders .
    Liability.At present time MTF are awaiting the out come of a court case, where the commerce commission state MTF charged, in some instances too high a fees.Result of this case should be known in November.
    MTF is a co-op with very strong dealer sharehoders such as Ford and Honda dealers.
    Heartland have expressed interest in taking over MTF.
    This is the first bond I have brought [only a few] at 68cents.
    The reason I have brought them, is I think they will be rerated once the court case is settled,and should Heartland takeover MTF go ahead they will then be backed by a Bank.
    Whatever happens I will enjoy great dividends,so long as MTF stay profitable.
    Last edited by percy; 21-10-2014 at 07:37 PM.

  2. #2
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    Thanks, percy. I have just a few... very "junky" in terms of ranking and very limited protection for holders, but MTF survived the GFC and, as a co-op, current shareholders have a strong interest in survival...plus the alternative is an HNZ takeover. I don't think there is any obligation to redeem on takeover, but HNZ could probably find cheaper sources to borrow from at present. Small hold only.

  3. #3
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    Cheers for the headsup. I bought some @ 69 not knowing re the court case but happy with the risk reward atp.Looks like others have the same idea.

  4. #4
    percy
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    Quote Originally Posted by Lizard View Post
    Thanks, percy. I have just a few... very "junky" in terms of ranking and very limited protection for holders, but MTF survived the GFC and, as a co-op, current shareholders have a strong interest in survival...plus the alternative is an HNZ takeover. I don't think there is any obligation to redeem on takeover, but HNZ could probably find cheaper sources to borrow from at present. Small hold only.
    There is no obligation to redeem on takeover,solely at MTF's [or whoever controls MTF] discretion.
    Last edited by percy; 25-10-2014 at 08:45 PM.

  5. #5
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    Is there any word regarding what penalties would be imposed were the commerce commission case to be lost?

    and forgive me for a question that probably belongs in the newbie thread, but I've never purchased preference shares before. Is it face value that's paid (i.e the 70 cent ask price) or does interest accrue since the last payment as with bonds?

  6. #6
    percy
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    To read the court case judgement go to www.stocknessmonster.com in quick tools type in mtfhc then NZ then news.then go to right hand side of page and click onto 2013 news,then click onto 8th October High Court Judgement and read it for yourself .
    The face value is $1,so you are paying 70 cents for $1.Interest is paid quarterly,next payment is this December.
    The 6.26% is on the face value $1 which works out at 8.94% at 70 cents.
    So are they worth 70 cents [the market says they are],if court case liability is modest, are they worth more,should Heartland Bank take them over are they worth more?
    MTF has strong car dealers who should be trading well.So strong shareholders.
    Should the court case go against MTF and commerce commission sends a strong message to finance companies "that some fees are unreasonable" how much are they worth?
    This is my first bond,it is a perpectual bond so I will follow its progress with ongoing interest payments going into my bank each quarter.So I am very much a learner here.
    My best case objective is they pay me over 12.5% gross on my 68 cents purchase price and are rerated to 75cents or so in the next year.So 10.2% capital appreciation and 9.2 net interest gives me 19.4% return.Should they be rerated to 80cents my total return over a year would be 25%.
    Last edited by percy; 21-10-2014 at 08:50 PM.

  7. #7
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    Quote Originally Posted by percy View Post
    My best case objective is they pay me over 12.5% gross on my 68 cents purchase price and are rerated to 75cents or so in the next year.So 10.2% capital appreciation and 9.2 net interest gives me 19.4% return.Should they be rerated to 80cents my total return over a year would be 25%.
    Don't stop there Percy. Should HNZ buy MTF and decide to redeem the preference, they will be rerated to $1 and my return would be XX%(too late to be bothered to work it out).

    Like Percy has stated, there is a court case to be resolved. The liability if MTF loses is unclear. Anybody buying should not be betting their house on it.

    Thanks for highlighting this one Percy
    No advice here. Just banter. DYOR

  8. #8
    percy
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    Every now and again there has been talk of HNZ having a bond issue.
    My thoughts are the MTFHC issue at $40mil is very small, and HNZ would go for a lot larger issue.
    They might therefore offer to repay these bonds at face value $1, or give holders the options to convert to HNZ bonds.
    From 70 cents to $1 is 42.85%.That is off course dependent on HNZ taking over MTF.
    Lots of ifs ,and unknown liability [court case],but it caught my interest.
    The court case,I take it is I take "the some fees are unreasonable" to refer to troublesome loans.
    Most loans are not troublesome so I do not see the problem as being huge.
    Troublesome loans are difficult and expensive to collect,so I think "commercial practice" or reality common sense must be reached.The courts with their huge fine arrears, should be aware of the collection problems.
    Last edited by percy; 22-10-2014 at 07:16 AM.

  9. #9
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    Before anyone gets carried away with their capital gain prospects, one should ask themselves...suppose we get through the court case appeal okay and that obviously contains its own risks and suppose HNZ does eventually make a takeover offer that's accepted, HNZ are still subject to stringent capital requirements of the Reserve Bank including capital adequacy requirements so I can't think of any reason why the parent company would repay funding that's classified as capital in its subsidiary when said capital is on such attractive terms at only 6.8% ????. Its simply not possible to raise money that's classified as capital, (any proposed 5 year term or thereabouts bonds are not capital) at anything like 6.8% so I'd rate the likelihood of all that happening and the preference shares being repaid as very remote.

    On the other hand as discussed with Percy by PM, there's a good chance the preference shares would be re-rated under new ownership so some capital gain is possible under a potential HNZ take-over.

    Its also perhaps worth noting that its a matter of public record that MTF have spurned HNZ's overtures to date.

  10. #10
    percy
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    I would like to acknowledge the help Roger gave me understanding the ins and outs of these MTFHCs.
    Again thank you Roger.

  11. #11
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    Always happy to help whenever I can mate.

  12. #12
    percy
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    Well for an illiquid "junk bond" there has certainly been "respectable" volume being traded.
    The price has moved from 68cents,when I brought on the 7th October to 73cents today.7.35%.,or 2.45% a week. Nice.!
    May have to look at more bonds,or do I put it down to beginner's luck? lol.
    Last edited by percy; 28-10-2014 at 03:46 PM.

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    Ditto here lol. Thankyou to Lizard.

  14. #14
    percy
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    Today's announcement that The Commerce Commission has abandoned its cross-appeal in the Sport Zone case comes as no surprise.
    MTF and SportZone's appeal is set down for 19-20th November.

  15. #15
    percy
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    Quote Originally Posted by percy View Post
    Well for an illiquid "junk bond" there has certainly been "respectable" volume being traded.
    The price has moved from 68cents,when I brought on the 7th October to 73cents today.7.35%.,or 2.45% a week. Nice.!
    May have to look at more bonds,or do I put it down to beginner's luck? lol.
    But wait........There's more !!!!!!!!!!!!!!!!
    Great volume being traded at 75cents............................
    Another 75,000 this morning................

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