Provident financial 6% 2021

Anybody else been caught out? Only got a small amount but guilty of taking my eye off the ball lately. Given the amount I hold I think I'll just sit tight and see if it blows over in the fullness of time (probably a lot of time!). Divi on shares appears to have been suspended but haven't found any news yet on the bond payments. Anyone else have any info?

Comments

  • More immediately, their 7% 2017 bond matures in just 6 weeks' time. Does today's announcement threaten repayment? I don't think so, but the bond is down to 95.6p today, showing some people disagree.
  • Don't have a position, buy my gut feeling would be hold tight. As long as the balance sheet is reasonably strong, the company should be able to recover. DYOR.
  • Contagion from Provident Financial woes to IPF1. Thinking I should have trimmed my position in IPF1 following recent recovery.
    Re. Provident Financial, I guess the network of collecting agents is the fundamental core of the business (see Oliver's original write-up) and if that falls apart, then the continued existence of the enterprise is at stake. Nevertheless, it can't be impossible to repair, even if it means swallowing humble pie and returning to the previous structure. I am stuck with a small position in PF shares but no bonds and trying to work out now if these bonds are an opportunity or value trap at the current price (around 70p). Anybody tempted?
  • I'm a bit tempted - but don't taken any notice of me. I hold Enquest and Eros bonds but if my Co-Op seniors mature fully paid next month and the PF bonds are still at distressed levels then I might have a small punt. Mind you, a lot can happen in 4 weeks.
  • Laughton - don't think you are the only one to be tempted - they look really tempting to me as well. I sold the 2017 bonds in December when they were 103.25p. I do though , for me, have a shed load of IPF1 which are now about the average price I paid for them. Have managed to keep my sticky fingers off the keyboard all day, we'll see what the next few days brings
  • An interesting situation and a fair amount bought since this morning. Don't have any significant amount of spare cash at the moment (and enough lame ducks as well) so I think I'll just watch how it pans out.
  • Couldn't resist a small nibble at the 7% 2020s

  • These are all the current Provident Financial Retail Bonds as far as I can make out.


    The PFG7s are "Guaranteed"

    The Guarantors have unconditionally and irrevocably
    guaranteed the due payment of all sums expressed to
    be payable by the Issuer under the Trust Deed, the
    Bonds and the Coupons. Their obligations in that
    respect are contained in the Trust Deed.


    Whether that means much if the crunch came I don't know as I haven't read through the whole prospectus.


    66WS Provident Financial Plc 5.125% Nts 09/10/23

    PF17 Provident Financial Plc 7% Nts 04/10/2017

    PF21 Provident Financial Plc 6.00% Nts 27/09/21

    PFG7 Provident Financial Plc 7.00% Gtd Bds 14/04/20


    Woz


  • Been reading some more analysis and it looks as though the FCA investigation into the Vanquis division is potentially more of a problem than the collection agents network, given the precarious state of the company. I'm waiting to hear a little more before buying. The whole business is larger and more complex than when the bonds were issued.
  • Neil Woodford's take on today's announcement -

    https://woodfordfunds.com/words/blog/update-on-provident-financial/

    He's certainly a lot more more qualified and experienced than me but I'll be giving it a few more days before making any decision. Cheap could yet get cheaper.
  • Woodford is no more qualified than anyone! Don't believe people like him are any better at investing than the rest of us. He topped up his holding in Provident last month after the previous profit warning and his funds are all underperforming the benchmarks. I sold my 6% bonds first thing yesterday at 90p. I sat on my hands during the Coop fiasco and regretted it. This could be another Coop.
  • I have smallish holdings in both 66WS & PF21 issues (2% of portfolio), just added to the PF21 @ 74.25 making it around 3% of total portfolio
    Bad news tend to provide buying opportunities
    Operational issues can usually be turned around, in particular if management is changed
  • I was thinking the same as shaunm yesterday when I bought the 7% 2021 at 68 but I was also reading about the issues with the FCA Vanquis investigation and with the Vanquis product in question generating decent profits I decided to bail this morning from the 7% 2021s and thankfully made a tidy profit selling at 87.92.

    I don't need the risk in my portfolio.
  • My natural inclination is to view this as a buying opportunity but my main concern is that the changes to the collecting agents model in order to (taken from the Woodford comments) 'ultimately allow the company to more effectively manage its customer relationships' is fundamentally wrong headed and may well be difficult to unravel.

    It strikes me that this may be a classic piece of management double speak in that the 'newly organised sales force' is not actually managing customer relationships in any meaningful way but rather administering a system based on automated generation of texts, emails, letters, etc and forgoing (in the name of 'efficiency' of course) the actual customer relationships of the previous doorstep collection model, which obviously involved face-to-face interaction.

    I know very well from my mother's (lengthy!) descriptions of her work as an agent managing (someone else's) buy to let portfolio that people who owe money are highly inclined to ignore texts and phone calls they know are related to their debts but that you are much more likely to get results if you knock on their door and speak to them in a friendly and reasonable manner and suggest something realistic about repaying their debts. Given that these properties are mainly ex-council, I imagine the tenants have a fairly similar profile to Provident's customers.

    I also think that Woodford's comments about the new approach reflecting the 'changing regulatory landscape' are concerning as this implies it might not be straightforward for management - even if they were so inclined - to give up the new structure as a bad job and go back to the old set up. The difference in collection rates between the old and new models is drastic - startlingly so - and thus my key concern is that Provident's ability to collect payments might be impaired for the long-term, if not permanently, and that this could undermine the basic rationale of their business model.
  • Finn2, thanks for your comment regarding IPF1,
    Purchased a few more @ 95.19 which have only 2 years 8 months until maturity
    I would expect that perhaps the price go above par as it gets closer to maturity, with the risk reducing.
    Why the "Contagion" from Provident Financial I'm not sure
    DCS, Very good comment, No doubt Neil Woodford will ensure their "Business Model" is workable & profitable, his stake is much larger than ours!
  • I realise that this is probably a bit unlikely but is there any chance that the sudden decision to withdraw the interim dividend ("the group must protect its capital base and financial flexibility") was actually because someone suddenly remembered that they needed the money to repay the 2017 bonds?
  • yes absolutely! , they need to conserve cash. Bond Coupon payments and Bond redemptions are not optional, if they are missed the bond holders can effectively take control on the company, in the case of Enquest, the directors effectively said that unless the bonds were restructured the company would be worthless, so it was a hobson's choice to accept the missed coupon and agree to a restructure.
    I guess they will have to refinance the redemption, ie issue another bond, luckily their bond prices have recovered so the refinance will not be expensive as it could have been.
  • If they opt for another retail bond issue, it will be interesting to see what coupon they offer. It will have to be quite high to generate enough volume given the current situation. Barclays just put a zero sum of parts valuation on the home credit division and there's an FCA investigation hanging over Vanquis - it's difficult to see what security they will be able to offer.
  • @ Paddy & Finn: Don't forget that Provident owns a bank, Vanquis, so it has another option. On cue, Vanquis Bank has today improved one of its savings bonds and moved to the top of the table in the segment with a fixed, four year, no access, FSCS covered savings bond offering 2.35%. It'll be interesting to see if the rates on its other accounts are also improved.
  • DSC Good article, your dead right, got it in one !!!
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