I've just ploughed some more money into SEVPC this arvo given that it hasn't traded in the 93s for about a month, and we're now a month closer to the step-up date.
It's anyone's guess what will happen on 31 May, 2010. Redemption is certainly a possibility, but this would deplete SEV's cash holdings by $496m, and this could limit their ability to carry out a major takeover. Stepping up the rate is another possibility, but the additional 2.25%pa margin would cost SEV another $11.2m in interest per annum - not to mention the effects of any further increases in the BBSW. For every 1% that the BBSW rises, SEV's interest bill will increase by around $5m per annum.
The other option is to convert the SEVPC into SEV ordinary shares but I really don't consider this even a remote possibility as it would have a substantial dilutive effect on Stokes's own holdings.
After May 2010, whether I get $100 cash per share, or $102.56 worth of SEV shares, or continue to get an annual return of 6.9% fully franked (subject to BBSW), I'll be happy.
Which other hybrids do you hold, Boomer?
SEV Price at posting:
$6.42 Sentiment: LT Buy Disclosure: Held
