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"His next big task is to complete a restructuring of the company's debts this year."
https://www.thisismoney.co.uk/money/markets/article-10075443/Quit-UK-stay-says-man-Pru-Mike-Wells.html
If I understand todays news correctly, it looks like they are now planning issuing new bonds to pay down old ones with an even lower "coupon" than the ones already chosen for redemption - USD725 million 4.375% undated tier 2 notes. The "lead managers" include banks from France and Japan.
Company is not really explaining these balance sheet activities very well to ordinary investors. Their given reason is that "The equity issuance will serve to maintain and enhance Prudential's financial flexibility in light of the breadth of opportunities to invest for growth in Asia and Africa." That's the same reason for issuing the new shares. They don't explicitly say how issuing new "fixed interest" money to pay off existing ones achieves that, or why it is being done now. Presumably the new bonds will have lower coupons, or have some other benefit? Another possibility is that they are adapting to the different regulatory conditions they face in Hong Kong?
The market doesn't seem surprised or concerned at all this capital structure sculpting. Maybe we're still not "done" yet after all, and there is more shape shifting to come?
With most of the debt at a 5.25% coupon I am surprised they call it high coupon….surely there is a better use of expensive shareholder capital.
BBD They listened to you then. Good call.
It would be a surprise if they didn't redeem the amount of high coupon debt announced. They would then have the capability to borrow from a stronger capital position at, presumably, lower rates. Maybe sell corporate bonds to Mike's new fans in Asia. Some might question why they've carried high coupons for so long, in a low interest era, but apparently you can't make an omelette without dinosaur eggs ( :
do you have anything particular in mind
as a target for such a bolt-on acquisition?
The HK listing seems t be having a positive effect with Pru rising as London financials decline.
Close to 1500 now.
Now they have cash on the balance sheet, The stated aim is to retire high coupon debt will they be tempted to make a bolt on acquisition and retire less debt and refinance some at lower rates?
Plenty of growth to occur is Asia and Africa.
would be nice to think that slow and steady will win the race,
but then again, that’s not how usain bolt won his medals.
Dealing in the new shares commences in HK, Singapore and London. Long term plan completed, it seems. Woo hoo?
The roadshow materials showed a$125m benefit from debt redemption.
Lower debt should also result in a stronger credit rating when they roll over other debt.
Unless they were at risk of a credit downgrade I really struggle to see the need to deleverage the balance sheet.
I suspect the HK listing will be rejuvenated….there was trading of 500k here earlier this week from a previous 90 day volume of less than 10k. The valuation gap to AIA will be noticed and close over time.
yet their articles seem to indicate that they truly are foolish?
https://www.fool.co.uk/investing/2021/09/21/why-did-the-prudential-share-price-crash/
The price did not "crash" because "the market’s big investors don’t much like the idea " of the HK fund raising - it was obviously no surprise to anyone and irrelevant to the temporary blip. If Osborne avoids Pru because of the "relatively low dividend" then why is he invested in Aviva, when M&G's yield is so much higher? When he posits Pru as a Chinese play, he's missing the entirety of the rest of Asia, which is ignorant and misleading, and when he asks "those Chinese live longer than western customers, don’t they? " the answer is "no, Alan, they don't, apart from Hong Kong": https://www.worldometers.info/demographics/life-expectancy/
Finally, when he concludes that "there’s a risk that traditional Prudential investors will shy away from the company now. So I reckon we could see some share price weakness over the next year or two", he doesn't seem aware that there is a completely new market of investors just opened up in Hong Kong, and Asia generally, or that Pru now offers a more focused appeal to non-traditional investors. So applying the full facts to his line of reasoning produces the exact opposite of his assessment.
Despite giving all his reasons for not investing in the past, he then suddenly changes tack and blurts "Prudential is definitely on my list of candidates. And I might finally buy some." His justification is that " the Chinese market {has} got to be one of the best ways of looking to expand the business in the decades ahead." Again, it's not just China and the changes have been flagged for months, Pru's policy has been Asia-focused for a decade or more, and all the caveats he listed are still in place, in fact the dividend is even worse now, so his given reason for a U-turn also makes no sense whatsoever.
Pru reporting an estimated $2.4bn raised in HK, and planning to use it to redeem $2.25bn of high-coupon bonds. Seems like they've got $150m spare cash for a celebration party?
Looks like HK share holders are in for a nice profit whereas the long term UK share holders are sold short with JXN shares.
Just been told that HSBC will not be selling my JXN shares automatically on the 12 Oct if I do nothing be will be transfering to another provider ? which I don't have. (previous communication told incorrect) so either sign up to a plus account or sell up pre 12th Oct.
There is no hiding place for Pru now.
Can’t blame European and US operations for holding the value o f the Asian businesses back any longer….
One significant question is how they deal with JVs in China and India and demands for local involvement across the region…..probably best to keep some local cover and not be too bullish in China and India as they both have track records in keeping foreigners out.
Asian investors seem to love the mildly discounted price. Smiling Mike claims "a focus on achieving long-term double-digit growth in embedded value per share", so a radical policy change from the last 5 years then? ( : Hope the worst is in the rear view mirror for the SP now, good reason for optimism over future results presentations.
market seems sanguine.
https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0926/2021092600023.pdf
A link to the HKSE announcement for those who are interested….there will be further details of the applications and any scaling on Thursday with the shares trading from Mon 4 Oct.
Is set at HKD143.8 or £13.51
This is a 3% discount to the london close.
Glad this bear situation is now done with and I expect a quick rise to 1500.
I agree picstloup…..if the sustainable cash to sh is at that level….but there is a lack of clarity whether any f the possible cash return is a one off..
Current price is a bargain….I do expect 50USD but not for a while.
Got my two blocks of JXN, one at $30 and one at $25, now slightly in profit as it went back to $28 today. Morgan Stanley has JXN at "overweight" with a target of $37. If they do manage to get $325-425 back to us in the first year, fair value would be well north of $50.
small recovery, even despite evergrande missing payment,
so that’s nice, but yes indeed, what a lousy week in which
to get the far east funded raise sorted, very unlucky timing.
glad i sliced that 25%, but in hindsight, lol, more would have been better!
interesting decisions whether to buy that slice back, or e.g to increase jxn.
Yep, Blown huge hole in my portfolio today could drop further on HK valuation. Absolutely no thought for the small share holder.
Unlucky timing to be launching a share issue n a falling HK market.
Only 5% new shares to be issued but this may trigger a 10-15% slide this week….it might depend on the HKSE performance later this week, but it is off to a poor start.