sevpc, page-2

I'm thinking along the same lines. As I see it, the major risk with SEVPC is that they won't redeem the TELYS3...but even if this occurs, the yield will be huge as you say, so it's really not such a bad outcome for holders.

It will be interesting to see what happens to the market value of SEVPC if SEV chooses not to redeem. There really should be a 'floor' to the price, given that the further it falls, the higher the yield (especially when you factor in any potential increases in the BBSW). The only fundamental factor that could affect the value of SEVPC would be if SEV made large-scale, poor investments with its cash holdings, such that its ability to pay interest on the TELYS3 would be considered to be at risk. I think it's hard to see this happening: the recent Morningstar report on SEVPC commented on how media assets have rallied off their lows earlier in the year, so the best time to invest has now passed; they added that SEV continues its on-market buyback of ordinary shares, which would not be typical behaviour of a company that wishes to preserve capital for a major investment.

I think it would be hard to imagine SEVPC dropping below $90 if they choose not to redeem, but if this was to occur, the yield would be more than 10.3%pa gross (plus 1.1%pa for every 1.0% rise in the BBSW). Should SEVPC fall following May 2010, I'd be inclined to invest more money in them (though would of course have to re-examine the fundamentals at that time).

Really can't explain the recent fall in SP of SEVPC but it's great for long-term holders.