Cumulative preference shares

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.
Reply to
Derek F
In message , Derek F writes
I wouldnt call 6.09% 'fantastic interest', 'very goo' but with some inherent capital risk. What price did you pay for them?
This link indicates that the company could be buying them on the market :
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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.
Reply to
john boyle

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.
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, was136m 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 of1 perpreference share, together with any arrears or accruals of dividend, in priority to any payment on any other class of shares.
Reply to
Derek F
In message , Derek F writes
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.
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.
Reply to
john boyle

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