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