I was alerted this morning by a notice from DBS to redeem the 4.7% preference shares. It's here. My first thoughts are that I haven't even got the interest yet from the preference shares and now they are redeeming it?!
Upon closer examination, I realised that they are redeeming back another preference shares, one with the same coupon interest of 4.7% but not listed in mainboard SGX. This one that they are redeeming is the 250k per bond one.
A few issues:
1. In the prospectus for that preference shares, they noted that the first call date is 22-Oct-2020. Then of course, they also put in a clause that said that they can change the early redemption date under this nice technical name of "Change of Qualification Event". And this notice posted by SGX is that such a change occured and they are now going to have an early redemption date on 21st Mar 2014! How is this fair to people who bought in thinking that they are going to park their money there until 2020, which is another 6 years from now?
Well done. Even preference shares can be hacked by those in power. With a stroke of a pen, the redemption date is changed. Just like that. Of course this is all legal and above board (since there is a clause in the prospectus), but legal doesn't mean that it's fair.
2. The last payout for that preference shares is on 22 Oct 2013. From that date until the early redemption date of 21st Mar 2014, there's a good 149 days (including 22-Oct but excluding 21-Mar). Well, at least they are going to pay the holders the sum owed during that period. I didn't know they are going to do that.
3. The next thing to think about is whether they will also redeem back the dbs 4.7% listed on mainboard SGX. That's the worry, since both of these preference shares belong to the same tranche and issue mostly along the same terms and conditions. So far, nothing is said. But I guess investors are not going to wait around and find out. The price of DBS Bk 4.7% NCPS 100 dropped 0.7% to 106.150 today. Better price on the market than if it's redeemed at par of 100.
Thursday, February 13, 2014
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9 comments :
I think is of slightly different understanding. I remember when they first announced is due to compliant issue which is allowed, and they need to change in-exchange of a new issue.
Hi LP,
What do you intend to do after selling off the DBS preference shares? Invest in CMT retail bonds?
Hi Cory,
That's what peroxide said too. But I couldn't find the exchange. Any links you can point to guide me here?
Hi Derek,
Not selling off leh. Will hold it until they said they are going to redeem. This redemption is not the one that is listed on sgx. It's for the 250k per bond one.
As for the CMT bond, I'm going to apply in advance first. If necessary, I can 'sell' to my parents at par if one of the pref shares gets redeemed :)
You going to apply? I've a feeling it's going to be hot.
There is a discussion in the hw zone which someone put the details.
http://forums.hardwarezone.com.sg/stocks-shares-indices-92/will-dbs-early-call-4-7%25-pref-shares-par-4455387.html
Hi Cory,
Much appreciated! thanks!
Hi LP,
Tempted but I will work out the sums this weekend. I need quite a lot of cash if I'm going to buy a property. kekeke
Just found this today....
http://www.dbs.com/annualreports/2012/capital-management.html
"Lastly, Basel III has revised the criteria for the eligibility of capital instruments. The Group’s existing preference shares and subordinated term debts are ineligible in the first instance as capital instruments under Basel III rules as they lack provisions for conversion to ordinary shares or write-down at the point of non-viability as determined by the MAS, but are accorded partial recognition under the Basel III transitional arrangements.
On a pro forma basis, the Group’s Basel III CET1 CAR as at 31 December 2012 was 13.5% based on transitional rules effective on 1 January 2013 and 11.8% on a “look-through” basis, i.e., after all adjustments that will eventually be taken against CET1 by 1 January 2018. These levels exceed the minimum CET1 CAR requirements under Notice 637 of 4.5% effective on 1 January 2013 and 9.0% effective on 1 January 2019 and take into account higher risk-weights for exposures to financial institutions and new capital charges for over-the-counter derivatives under Basel III.
The Group is well-positioned to comply with other forthcoming Basel III requirements, viz., leverage ratio, liquidity coverage ratio and net stable funding ratio."
so what this mean ? :)
Hi Cory,
Not sure what this means... They changed the institutional tranche of this pref shares to fit into the new regulatory requirements. But for the retail one, I believe, they didn't recall back prematurely because the amt is too little. This one shouldn't fit into the new regulations, but they did it out of goodwill and didn't recall.
Not sure what else there is to see regarding this matter?
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