The banks are having to pay 12% interest

gozomark

Anyway preference shares count as dilution dont they, just not voting rights

preference shares are between equity and debt - they are not counted as potential equity for dilution calculation purposes (unless they are convertable preference shares)

chopperharris

Just to add my reasoning why I dont have barc shares.I remember enron executives in the year before the bombed is one of them.I never had any money in enron , hindsight is 20/20.

barc are the biggest risk on the high st banks just now.The only reason why I see they didnt want govt cash is they didnt want govt seeing their true exposure.They pretty much proved from the beginning that they would not give data as a condition to any bail out.Combine this with share price protection as a secondary , if not primary motive and you can see why I dont fancy them.

I Bought into rbs big instead of barcs for the long term all be it quite recently , so it was the better side of the quid unlike some.Im not in it for the divi , or the day trade , or even the greed motivation.Ten years or more it will sit , if I make money good , its less than 5 percent of my self invested portfolio overall this year alone.....it was a fraction of my interest from savings last year held with rbs itself.

When I smell something fishy , I dont asses my risk v that potential reward , I dont even consider it at all , its worked for me to date. My overall portfolio has slipped a little over 11 percent in the last year , around 160-180k , while the ftse and banking shares ....well you know how they have faired in that time.

The fact that they (barc) could have got the loan lots cheaper at the expense of temporary divi suspension , well its just stupidity and plain bad banking sense not to take the cheapest payback....or are the big boys protecting their own PERSONAL shares above everything else.Watch for the big wigs offloading , if they havent already....much like enron execs did.

Im not barcs bashing , just giving my opinion on why I personally dont think barcs are a good buy.

sabretoothtigger

Barclays Market Data

Currency UK Pounds Share Price 149.50p Change Today -4.60p 52 Week High 554.14 52 Week Low 138.00 Volume 52,344,524
Shares Issued 8,370m Market Cap £12,514m Beta 1.67 RiskGrade 543

The capital raising includes £3bn of reserve capital instruments, which pay an annual coupon of 14% until June 2019; warrants to subscribe to 1.5bn new ordinary shares [options] at 197.775p each, exercisable at any time for five years; and £2.8bn of mandatory convertible notes
B][COLOR=Blue]1.83bn shares[/COLOR][/B which will pay an annual coupon of 9.75%. The conversion price on the converts is 153.276p.

So if I understand that right then compared to the government offer of 1:4 pref/ordinary, barclays is more preferential, debt based and the institutional shareholders didnt like this


http://www.breakingviews.com/2008/11/03/Barclays.aspx

gunnaknow

Is there a limit to how far share prices can drop before a bank goes bust? Mathematically speaking, you could knock 90% of a share's price off each day and never each zero. You'd eventually pass 0.00000001p but never reach zero. You'd only reach zero if you knocked 100% of the share price off. When does that time come? When the bank's creditor's debts are due and the bank can't borrow or raise the money from elsewhere? Is this the point when the bank files for bankruptcy, shares lose 100% of their value and the bank is liquidated?

gozomark

gunnaknow wrote: »

Is there a limit to how far share prices can drop before a bank goes bust? Mathematically speaking, you could knock 90% of a share's price off each day and never each zero. You'd eventually pass 0.00000001p but never reach zero. You'd only reach zero if you knocked 100% of the share price off. When does that time come? When the bank's creditor's debts are due and the bank can't borrow or raise the money from elsewhere? Is this the point when the bank files for bankruptcy, shares lose 100% of their value and the bank is liquidated?

a company can go bust at any share price. What's the lowest a share price can trade at ? - that depends on the relevant stock exchange, and will be partly a matter of common sense, and also on a minimum market capitalisation

Blah99

miserable_ol_so_n_so wrote: »

Thanks for the info. I wanted to find out if the institution can decide not to pay, and still carry on trading as if nothing had happened. You gave the answer. What would the position be, if the institution was rescued by the government, like for Northern Rock, Bradford and Bingley? Are the preference shares in any way secure under those circumstances?

Wow people have hijacked your thread quite significantly!

In that situation the holders of preference shares aren't "secure", as such, however they are ranked as creditors above the holders of ordinary shares.

Basically when a company goes bust there is an order of payout: banks and lenders get their money first, along with other corporate creditors (ie: comnpanies who haven't had invoices paid). Once they've been paid, the holders of preference shares may then get paid. And once they've been paid the poor old shareholders might get a few crumbs from the table. Of course none of these creditors, including the banks etc, may necessarily get anything - if the company goes bust and doesn't have enough assets to cover debts, nobody gets paid.

That's a massively simplified version, but hopefully it answers the question?

miserable_ol_so_n_so

Blah99 wrote: »

Wow people have hijacked your thread quite significantly!

In that situation the holders of preference shares aren't "secure", as such, however they are ranked as creditors above the holders of ordinary shares.

Basically when a company goes bust there is an order of payout: banks and lenders get their money first, along with other corporate creditors (ie: comnpanies who haven't had invoices paid). Once they've been paid, the holders of preference shares may then get paid. And once they've been paid the poor old shareholders might get a few crumbs from the table. Of course none of these creditors, including the banks etc, may necessarily get anything - if the company goes bust and doesn't have enough assets to cover debts, nobody gets paid.

That's a massively simplified version, but hopefully it answers the question?

Thanks for the info. I was doing some lateral thinking. Obviously any investing carries a risk. What was considering was purchasing an investment like this, and treat it as a sort of an annuity, holding it till death, no necessity to redeem at any stage. Obviously investing in just one share is risky. I will look at gilt and bond funds
where return wont be as much, but risk will be spread.

To add a bit, I do have some preference shares, received when Halifax bought Birmingham Midshires, and they have been paying interest on them. A good source of small reward for life.