I have purchased some bonds (actual bonds, not a bond mutual fund), due 2015. I got an "exchange offer" in the mail box. I don't understand what's going on, so I'll just type it out.
If Exchange Offer instruction received by the bank before 24 April 2014 (Noon): with respect to each US$1,000 principal amount of US$ notes (1) at the election of the Eligible Holder, (a) a principal amount of US$1,000 of New 2018 Notes; OR a principal amount of US$1,000 of new 2020 notes, in each case subject to the provisions relating to minimum denominations; PLUS (2) the Exchange Premium of US$45.00; PLUS (3) accrued interest; PLUS (4) the Early Participation Payment of US$7.50. The consideration described above, excluding Accrued Interest, results in a theorectical exchange price for the US$ Notes of 105.25%.
If Exchange Offer instruction received by the bank after 24 April 2014 (Noon): Same as above, but without the Early Participation Payment of US$7.50. The consideration described above, exclusing Accrued Interest, results in a theorectical exchange price for the US$ Notes of 104.50%.
If you wish to participate in the Exchange Offer, please indicate your choice:
a) Exchange to a US$-denominated Regulation S Senior Notes due 2018 with interest rate and yield no less than 8.5%
b) Exchange to a US$-denominated Regulation S Senior Notes due 2020 callable 2017 with interest rate and yield no less than 9.25%.
If you do not wish to participate in the Exchange Offer, you may take no action.
Please seek professional advice if you have any questions.
Now, since languish is my best source of financial advice, what does languish say?
You may need to seek better financial advice than Languish.
As far as I see, there are 2 decision points.
One, I need to decide to do this or not. It seems there is no reason to do this after 24 April (noon). My understanding is that the existing bonds are due 2015. But for some reason the bond issuer wants to pay me back later. So this is effectively extending the bond due date by a few years.
Two, if I am going to do this exchange thing, I need to choose between the new due dates of 2018 or 2020. The 2020 due date has a higher yield, but is callable in 2017.
Quote from: Grey Fox on April 22, 2014, 07:46:26 AM
You may need to seek better financial advice than Languish.
There is none. The frontline bank staff don't know anything, hence the "please seek professional advice" line.
Come on, just say something :contract:
Do you need the cash in 2015?
Is the return on extending the bonds better than what you could get out you cashed out and put the money elsewhere?
Quote from: sbr on April 22, 2014, 07:56:15 AM
Do you need the cash in 2015?
Definitely not.
Quote from: sbr on April 22, 2014, 07:56:15 AM
Is the return on extending the bonds better than what you could get out you cashed out and put the money elsewhere?
This is the big question, isn't it? I have no idea what the "theorectical exchange price" is. I also don't understand what "interest rate and yield" means. I understand coupon rate and bond yield, but not "interest rate and yield". The yield of 8-9% sounds unrealistically high to me in the current market. So the 8-9% most probably mean something other than bond yield.
That's a crazy yield. What's your current coupon?
And what's the bond rated?
Quote from: Admiral Yi on April 22, 2014, 08:05:21 AM
That's a crazy yield. What's your current coupon?
9.75%. That's coupon, not yield.
Sounds like they anticipate trouble paying off the higher yield in 2015 and want to push redemption out (and lower the yield) by paying a cash bonus now.
Unless you need the money now, I'd hold on to the existing bonds. There's a reason why they want to pay you to switch - almost certainly because its a better deal for them (and less of a deal for you). If you need cash in the short term, taking this deal is better than borrowing the money.
Note that I haven't worked out the financials on this, i am just basically analyzing based on qui bono. But my advice is to stick with what you have.
Quote from: Monoriu on April 22, 2014, 07:27:30 AM
I have purchased some bonds (actual bonds, not a bond mutual fund), due 2015. I got an "exchange offer" in the mail box. I don't understand what's going on, so I'll just type it out.
If Exchange Offer instruction received by the bank before 24 April 2014 (Noon): with respect to each US$1,000 principal amount of US$ notes (1) at the election of the Eligible Holder, (a) a principal amount of US$1,000 of New 2018 Notes; OR a principal amount of US$1,000 of new 2020 notes, in each case subject to the provisions relating to minimum denominations; PLUS (2) the Exchange Premium of US$45.00; PLUS (3) accrued interest; PLUS (4) the Early Participation Payment of US$7.50. The consideration described above, excluding Accrued Interest, results in a theorectical exchange price for the US$ Notes of 105.25%.
If Exchange Offer instruction received by the bank after 24 April 2014 (Noon): Same as above, but without the Early Participation Payment of US$7.50. The consideration described above, exclusing Accrued Interest, results in a theorectical exchange price for the US$ Notes of 104.50%.
If you wish to participate in the Exchange Offer, please indicate your choice:
a) Exchange to a US$-denominated Regulation S Senior Notes due 2018 with interest rate and yield no less than 8.5%
b) Exchange to a US$-denominated Regulation S Senior Notes due 2020 callable 2017 with interest rate and yield no less than 9.25%.
If you do not wish to participate in the Exchange Offer, you may take no action.
Please seek professional advice if you have any questions.
Now, since languish is my best source of financial advice, what does languish say?
Put everything on red.
Quote from: Monoriu on April 22, 2014, 07:53:16 AM
Quote from: Grey Fox on April 22, 2014, 07:46:26 AM
You may need to seek better financial advice than Languish.
There is none. The frontline bank staff don't know anything, hence the "please seek professional advice" line.
Come on, just say something :contract:
I believe these things should not be legal.
Quote from: Monoriu on April 22, 2014, 08:13:09 AM
Not rated :ph34r:
To get that kind of yield in the US you'd have to eat a helluvalot of risk. I say walk away.
Quote from: Grey Fox on April 22, 2014, 08:37:14 AM
I believe these things should not be legal.
I signed a big pile of documents (which I didn't read) when I bought it. Pretty sure I signed all my rights away. They have legions of lawyers on their side.
I have languish though :sleep:
Is this the money that built the ghost cities and a hundred dams along the Yangtze? :P
It is a crazy high rate though. Are these usually denominated in USD?
Instinct says grumbler is right. Fear says when there is debt restructuring going on, bondholders usually get the choice of getting screwed a little or getting screwed a lot. Look at the recent PIIGS haircuts.
Quote from: Admiral Yi on April 22, 2014, 08:38:50 AM
Quote from: Monoriu on April 22, 2014, 08:13:09 AM
Not rated :ph34r:
To get that kind of yield in the US you'd have to eat a helluvalot of risk. I say walk away.
I think these days that's true everywhere. I don't know if we'll ever get back the days when an interest rate that doesn't start with 0. is considered risk free for an individual, but we certainly aren't there yet.
Portuguese bonds were in the 9% range a few years ago...
Quote from: MadImmortalMan on April 22, 2014, 12:41:16 PM
Instinct says grumbler is right. Fear says when there is debt restructuring going on, bondholders usually get the choice of getting screwed a little or getting screwed a lot. Look at the recent PIIGS haircuts.
The fearful route, I would think, is to bail on the 2015 date, rather than taking 5.25% of your investment and then hoping the venture holds together until 2018 or 2020.
Instinct and fear work together on this one; bail as soon as possible. Taking the pittance now and risking the haircut after the 2015 payouts is the gutsy call.
What PIIGS haircuts? There's some extra letters that don't belong in there.
Regarding the OP, when were you sent this, Mono? They seem to be giving you a really short window to opt-in, which is not the kind of thing you do if you want as many people to sign over as possible.
Yeah, a short deadline is another red flag, unless it's the usual way it's done there.
Quote from: MadImmortalMan on April 22, 2014, 01:08:35 PM
Portuguese bonds were in the 9% range a few years ago...
Daylight rubery.
Can't help you unless you come up with at least half, and pay off the other half before you go to court or it's pack your toothbrush time, I shit you not.
Quote from: celedhring on April 22, 2014, 01:32:00 PM
Regarding the OP, when were you sent this, Mono? They seem to be giving you a really short window to opt-in, which is not the kind of thing you do if you want as many people to sign over as possible.
22 April evening.
I don't think 8-9% is the yield. That's the coupon rate only. The problem is I don't know what the price is.
Take the money and invest in land :)
Quote from: Monoriu on April 22, 2014, 07:30:10 PM
I don't think 8-9% is the yield. That's the coupon rate only. The problem is I don't know what the price is.
It looks to me they're offering to exchange new bonds at par, paying the stated coupons, with the early acceptance bonus listed.
That part looks clear enough to me. My reservation about the deal is the risk implicit in those yields.
Who's the issuer?
:ph34r:
I suggest you don't take the offer.
I have decided to take the offer. May the Force be with me.
The only remaining question is if I am going to choose 2018 (8.5%) or 2020 (9.25%) (callable 2017). I am going to assume that they'll call the bonds by 2017 if they can issue new bonds at a lower interest rate. Seems to me that 8.5% for 4 years is better than 9.25% for 3 years. Leaning toward 2018 at the moment.
:lol:
Quote from: MadImmortalMan on April 22, 2014, 12:41:16 PM
Is this the money that built the ghost cities and a hundred dams along the Yangtze? :P
It is a crazy high rate though. Are these usually denominated in USD?
There are hundreds of different bonds for me to choose. I'd say about half of them are in USD. The other half are mainly in RMB or HK$. A small portion are in NZ$, A$. My bank doesn't do Euro bonds because they say it is too risky. The problem with HK$ bonds is that the yield is extremely low, like below 1%. This is because the HK government runs large surpluses and doesn't need to borrow.
Quote from: DGuller on April 22, 2014, 09:49:31 PM
:lol:
So much for taking advice! :lol:
Good luck, Mono. I hope these bond-issuing guys are not as fucked as they sound.
https://www.youtube.com/watch?v=E5RSrNFj_is
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fmedia.giphy.com%2Fmedia%2FkU0g3xMPHfhmg%2Fgiphy.gif&hash=b8bfc15e58a426a0cab350c99d422d0b44bcd22e)
Quote from: Brazen on April 23, 2014, 08:59:05 AM
(https://languish.org/forums/proxy.php?request=http%3A%2F%2Fmedia.giphy.com%2Fmedia%2FkU0g3xMPHfhmg%2Fgiphy.gif&hash=b8bfc15e58a426a0cab350c99d422d0b44bcd22e)
Somehow, I don't see Mono as a Church of England type. :P
Does it require much of anything to be a CoE type?
Quote from: garbon on April 23, 2014, 10:30:27 AM
Does it require much of anything to be a CoE type?
A sense of community will pretty much cover it. :bowler:
Quote from: CountDeMoney on April 22, 2014, 06:54:06 PM
Can't help you unless you come up with at least half, and pay off the other half before you go to court or it's pack your toothbrush time, I shit you not.
:mad: Come on, why won't you just take 10% like usual? Actually, now that I think about, Mono is a bit of a flight risk with his three passports and constant overseas travel. :hmm: But on the other hand, he is too obese and neurotic to hold out for too long, so I don't think you'd have to go pick him up.
Quote from: Capetan Mihali on April 23, 2014, 01:40:52 PM
Quote from: CountDeMoney on April 22, 2014, 06:54:06 PM
Can't help you unless you come up with at least half, and pay off the other half before you go to court or it's pack your toothbrush time, I shit you not.
:mad: Come on, why won't you just take 10% like usual?
Half is 5%, Matlock.