Apr 28 2016, 12:41 PM
QUOTE(guy3288 @ Apr 27 2016, 11:55 PM)
Hello frens,
RM pushing to sell me a bank bond, leave out the name as still unannounced,
and documents say internal circulation only.
Indicative coupon rate 6% pa, considered good .
perpetual, call option 5th year, ok.
Rating A1 (RAM) not bad though previous one AA and AA2.
On 1 sheet it says Tier -2 Bond
on Risk statement it says "Additional Tier -1" Bond
Tier 2 ="Additional Tier-1"??
My prev bond straight forward Tier 1 type.
Actually i dont quite get the Tier 1 and Tier-2 difference in terms of "seniority',
Does it mean if bank kaput, Tier -1 Bond gets paid first before Tier-2 Bond?
The key risk (attached) is disturbing.
Need some insight from you guys.
Write Down event-
BNM says there is nonviable event (?what is this), the bond can be written off just like that?
And if the bank's Equity Tier-1 drops below 5.12% - what does it mean actually?,
again bond holder will kena?
Discretionary Coupon -
Bank can simply decide not to pay interest??
yet not considered default - seems abit outrageous right?
While waiting for my RM to find out, might as well i ask here.
Oh yes, the product says "Moderately High Risk" -
A1 rating can be moderately high risk kah? Junk bond CCC high risk i know la.
Thanks for your input.
It may be called a bond; but its feature and risk is similar to Preference share. RM pushing to sell me a bank bond, leave out the name as still unannounced,
and documents say internal circulation only.
Indicative coupon rate 6% pa, considered good .
perpetual, call option 5th year, ok.
Rating A1 (RAM) not bad though previous one AA and AA2.
On 1 sheet it says Tier -2 Bond
on Risk statement it says "Additional Tier -1" Bond
Tier 2 ="Additional Tier-1"??
My prev bond straight forward Tier 1 type.
Actually i dont quite get the Tier 1 and Tier-2 difference in terms of "seniority',
Does it mean if bank kaput, Tier -1 Bond gets paid first before Tier-2 Bond?
The key risk (attached) is disturbing.
Need some insight from you guys.
Write Down event-
BNM says there is nonviable event (?what is this), the bond can be written off just like that?
And if the bank's Equity Tier-1 drops below 5.12% - what does it mean actually?,
again bond holder will kena?
Discretionary Coupon -
Bank can simply decide not to pay interest??
yet not considered default - seems abit outrageous right?
While waiting for my RM to find out, might as well i ask here.
Oh yes, the product says "Moderately High Risk" -
A1 rating can be moderately high risk kah? Junk bond CCC high risk i know la.
Thanks for your input.
Let's recap:
I) Perpetual coupon but not guaranteed similar to preference share's dividend payout. I.e., the dividend is known in advance but not guaranteed.
II) Issuer can miss coupon payment without suffering penalty, similar to preference share. But if dividend is to be declared, the bond holder will have first priority.
Hence, Guy3288, you should look at this instrument as similar risk to a preference share. If it is similar risk, then you should expect the coupon payout to be similar to the dividend rate of preference share in the market. Use them as a benchmark.
A good stock-broker should be able to advise you.
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