Turners (TNR) bonds

[Snoopy]

Thanks for your analysis Snoopy. I probably won't be investing in these bonds. But more because I'm building cash at the moment (will be greatly helped by AIR tomorrow) for future investments, rather than anything against the Turners bonds.

I should put the comments on my assessment of Turners bonds in context. I am a long term investor. So if the share price of TNR was lower in two years time than now, this would not worry me. If you wanted to definitely spend your invested capital in two years, then the TNRHB bond issue has more merit.

As a long term investor I hope for long term capital gain, as the dividend flow increases. But I accept the risk of capital loss is there, albeit reducing the longer your investment time horizon. My big issue with particularly New Zealand market bonds, is that the interest offered is sometimes less than the dividend yield from shares in the same company. In theory should a company get into trouble, the shareholders lose their capital before the bondholders. In practice, I cannot remember a company on the NZX that got into trouble where the shareholders lost their money, but the bondholders got all their capital back. So as a bondholder if you

1/ Get the same after tax income as a shareholder. AND
2/ Give up your right to capital appreciation AND
3/ Retain your right to lose your capital shoudl the company get into trouble.

THEN why would you do it? For this reason my preference is always to invest in utility type shares instead of bonds, for the New Zealand market (where high dividend yields are common) at least.

SNOOPY

[Snoopy]

So as a bondholder if you

1/ Get the same after tax income as a shareholder. AND
2/ Give up your right to capital appreciation AND
3/ Retain your right to lose your capital shoudl the company get into trouble.

THEN why would you do it?

I got a follow up note in the mail yesterday from Turners, reminding me about the TNRHB bond offer which closes at noon on Friday.

What a contrast to the original 'under the radar' TNRHA bond offer. In that, Turners claimed there were no plans to list theTNRHA bonds. Further, bondholders should therefore plan to be in until maturity. At the time Dorchester were really gunning for the old Turners Auctions shareholders to accept Dorchester shares, not what turned into TNRHA bonds as consideration for handing over their TUA shares! Subsequent to Dorchester morphing into the new Turners, the TNRHA bonds were of course listed - although liquidity was never good. Not sure how much of that was because at the time of TNRHA conception, bondholders were told they would have difficulty selling, so they never tried? Nominally TNRHA bonds were available to the general public. But the terms were so good and the scaling so skewed towards TUA shareholders, I don't think any investor not already inside the Turners tent got a look in.

Now we have TNRHB bonds and the public are once again invited to participate. With terms no longer being so good, maybe this time the wider investing public will get a look in? If that improves liquidity in the new bonds, that will be fine by me. I see a couple of brokers have now commenced coverage of TNR shares. I am curious if any brokers out there are promoting the TNR bonds!

SNOOPY