Cumulative preference shares


D

Derek F

Over the years I have bought various Cumulative Preference shares for some
of my PEP holding as they paid a good rate of interest. Although they all
had redemption dates in the future most have been bought back by the
companies. The latest one being Crest Nicholson 5.5%. The only one I am left
with is Balfour Beatty 10% which as well as giving me this fantastic
interest have risen from around a Pound to £1.64 a share. With present
interest rates this seems to good to be true. Can Balfour Beatty redeem this
one when they want to or does it have a guaranteed life?
Derek.
 
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J

john boyle

Derek F said:
Over the years I have bought various Cumulative Preference shares for some
of my PEP holding as they paid a good rate of interest. Although they all
had redemption dates in the future most have been bought back by the
companies. The latest one being Crest Nicholson 5.5%. The only one I am left
with is Balfour Beatty 10% which as well as giving me this fantastic
interest have risen from around a Pound to £1.64 a share.
I wouldnt call 6.09% 'fantastic interest', 'very goo' but with some
inherent capital risk. What price did you pay for them?
With present
interest rates this seems to good to be true. Can Balfour Beatty redeem this
one when they want to or does it have a guaranteed life?
This link indicates that the company could be buying them on the market
:

http://www.balfourbeatty.com/bbeatty/ir/shareholderinfo/agminfo/agm2005/n
om05/nom05.pdf#search='balfour%20beatty%2010%25%20cumulative%20preference
'

They are 'cumulative redeemable preference' shares. From what I can find
they cold redeem or convert them whenever they like, possibly subject to
a resolution at an AGM or EGM.
 
D

Derek F

john boyle said:
I wouldnt call 6.09% 'fantastic interest', 'very goo' but with some
inherent capital risk. What price did you pay for them?
I bought some in 1997 and more in 1999, the price including dealing costs
averages £1.13 a share. In the PEP I have been getting the full interest
rate.
This link indicates that the company could be buying them on the market :
They are 'cumulative redeemable preference' shares. From what I can findthey
cold redeem or convert them whenever they like, possibly subject to
aresolution at an AGM or EGM
..John Boyle.
I had this problem with Hyder Water Preference shares
andlostmoneywhen"Shareholders" voted to allow them to be bought back.
Ifoolishly took AMEC shares in return for my convertibles.The resolution you
quote is only to allow them to purchaseback20,000,000shares of the
130,000,000 in issue.
See below:
Derek.
Conversion InformationThe preference shares are convertible at the
optionofthe holder on the first day of the next calendar month following
receiptoftheconversionnotice into newBalfour Beatty plc ordinary
shareseffectivelyon the basisof 21.05263ordinary shares for every100
preferencesharesbased on thecurrent conversion price of 475p perordinary
share, whichissubject toadjustment in certain circumstances.Dividend
InformationHolders are entitledto a preferential dividend equivalent to a
gross payment of 10.75p perpreference share per annum, payable half yearly
on 1 January and 1 July.Redemption Anypreferences shares still outstanding
arer edeemable on 1 July 2020 at £1 each, together withany arrears
ofaccruals of dividend, unless the holder exercises any option granted by
theCompany toextend the redemption date.The maximum redemption value of all
of the issuedand outstanding preference shares, excluding any arrears or
accruals ofdividend, was£136m at 31 December 2004 and this amount has been
disclosed on the balancesheet as the total of non-equity shareholders'
funds. The Company is entitled toconvert alloutstanding preference shares
into ordinary shares if there are fewe rthan44,281,239 preference shares in
issue or if theaverageof the closing mid-market pricefor a Balfour Beatty
plc ordinary share during a 30 day period exceeds 200% of theconversion
price. At 25 April 2005, there were130,309,615 preference shares in
issue.Preference Share rights The preference shares carry no voting rights
at ageneral meeting of theCompany, except where the dividend is six months
or more in arrears, orwhere thebusiness of the meeting includes a resolution
which directly affects therights and privilegesattached to the preference
shares or a resolution for the winding-up of theCompany. On a winding-up of
theCompany, holders are entitled to receive the sum of£1 perpreference
share, together with any arrears or accruals of dividend, in priority to any
payment on any other class of shares.
 
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J

john boyle

Derek F said:
I bought some in 1997 and more in 1999, the price including dealing costs
averages £1.13 a share. In the PEP I have been getting the full interest
rate.
Ok, so your gross yield is 8.84%. But you have seen good capital growth
and the current running yield is 6.09%, but your total return since
(say) 1998 has been 115% (about 14% per annum) so it might be worth
taking your profit.
See below:
Derek.
Conversion InformationThe preference shares are convertible at the
optionofthe holder on the first day of the next calendar month following
receiptoftheconversionnotice into newBalfour Beatty plc ordinary
shareseffectivelyon the basisof 21.05263ordinary shares for every100
preferencesharesbased on thecurrent conversion price of 475p perordinary
share, whichissubject toadjustment in certain circumstances.Dividend
InformationHolders are entitledto a preferential dividend equivalent to a
gross payment of 10.75p perpreference share per annum, payable half yearly
on 1 January and 1 July.Redemption Anypreferences shares still outstanding
arer edeemable on 1 July 2020 at £1 each, together withany arrears
ofaccruals of dividend, unless the holder exercises any option granted by
theCompany toextend the redemption date.The maximum redemption value of all
of the issuedand outstanding preference shares, excluding any arrears or
accruals ofdividend, was£136m at 31 December 2004 and this amount has been
disclosed on the balancesheet as the total of non-equity shareholders'
funds. The Company is entitled toconvert alloutstanding preference shares
into ordinary shares if there are fewe rthan44,281,239 preference shares in
issue or if theaverageof the closing mid-market pricefor a Balfour Beatty
plc ordinary share during a 30 day period exceeds 200% of theconversion
price. At 25 April 2005, there were130,309,615 preference shares in
issue.Preference Share rights The preference shares carry no voting rights
at ageneral meeting of theCompany, except where the dividend is six months
or more in arrears, orwhere thebusiness of the meeting includes a resolution
which directly affects therights and privilegesattached to the preference
shares or a resolution for the winding-up of theCompany. On a winding-up of
theCompany, holders are entitled to receive the sum of£1 perpreference
share, together with any arrears or accruals of dividend, in priority to any
payment on any other class of shares.
The key paragraph is "
The Company is entitled to convert all outstanding preference shares
into ordinary shares if there are fewer than44,281,239 preference shares
in issue or if the average of the closing mid-market price for a Balfour
Beatty plc ordinary share during a 30 day period exceeds 200% of the
conversion price."

So they cant buy them back or convert them on a whim but if the
circumstances they describe occur, then they will.
 

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