# LRCN Bonds



## Tostig (Nov 18, 2020)

I thought it was a good time to look at short term bonds since the recent interest rate hikes meant that I could pick something with a good rating up at a discount.

So in BMO Investorline I looked for yields equal to or greater than 4% with a minimum purchase of $1000. What do I find? Seven percent yield not from a little high risk company but from Rogers. I'm thinking Rogers should never default even with all the bad news they had over the decades including the total system failure last year. Decades of government attempts to bring telecom charges down to reasonable world levels have failed. Telecom's ability to gouge their customers yet maintain their fluctuating customer base means their bonds should be rock solid.

But BMOIL doesn't show Dominion Bond Rating Services' ratings.

Then I notice something odd. In its description is the maturity date of '81, (2081). In the table of listed bond is the Call Date 2026. In the bond description are the letters LRCN.

I look up LRCN and start reading that these are preferred shares that act like bonds and offer higher returns than normal bonds.

1) Risk
I scroll and google looking for risks but can't find anything except what I already know that due to interest rate increases prices drop- which is the reason I'm now looking at bonds. But I can't find anything else that might cause unwitting investors to jump out of a window.

Too good to be true?

2) Call Date
What happens at the call date? Will the interest be reset? Is the holder given the option to turn in his LRCN bonds at face value? Will it cost any commission?

3) Calculated Yield
With its current price, commission, and accrued interest, coupon rate I can't seem to replicate the stated yield no matter what combination of including or omitting each factor. The good news now is that bond commissions are openly stated. I remember the time it was all so secretive.

There's an old thread called "Preferred Shares" that discusses LRCN but none is the basic details I am looking for.

Thanks.


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## Beaver101 (Nov 14, 2011)

^ Sounds sooo complicated. So what's the yield that you calculated/come up with? Up til 2081. And never mind it's Rogers (yuk).


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## Tostig (Nov 18, 2020)

Beaver101 said:


> ^ Sounds sooo complicated. So what's the yield that you calculated/come up with? Up til 2081. And never mind it's Rogers (yuk).


The posted was 7.1%. The best I can calculate wss 6.8%

Rogers (yuk) is right. For customers. That's why they should be great for income investors.


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## Beaver101 (Nov 14, 2011)

Tostig said:


> The posted was 7.1%. The best I can calculate wss 6.8%


 ... that's only a $300 difference for a $100K investment. Whoops, whoops... but seriously the call date is 2081 - that's 58 years from now! Or can you sell it waaaaay before that?



> Rogers (yuk) is right. For customers. That's why they should be great for income investors.


 ... like Rogers is the only "great" company for "income" investors ... whooops, whoops. 

Btw, Rogers ain't only a great company for investors but also for employees, thanks to its customers of which I ain't one ... even they're willing to pay me.


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## Beaver101 (Nov 14, 2011)

duplicate-deleted


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## Tostig (Nov 18, 2020)

Geez. I'm only asking questions. Not like there's a gun to my head to buy.

There are people willing to switch to Tier pricing on electricity to save a whopping $30 a year.


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## Beaver101 (Nov 14, 2011)

Tostig said:


> Geez. I'm only asking questions. Not like there's a gun to my head to buy.


 ... of course, no one is forcing you to buy since this is a free-enterprise country. But just off the bat, that call date is 58 years from now and are you willing to wait that long for 7 or 6% plus or minus .3%? Hell, I wouldn't even want to wait 5 years for a 7% if I know I can get way more than that UNLESS that rate is "guaranteed". Is it? I mean you're doing alot of work for a couple of extra points, not saying that you can't learn as I don't even know what an "LRCN" "bond" is. 



> There are people willing to switch to Tier pricing on electricity to save a whopping $30 a year.


 ... yes there are and there're people who's willing to wait for an online delivery to save $1 on garbage bags.  I say kudos on that patience!


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## Covariance (Oct 20, 2020)

You really need to look at the specific terms of this security to get to a valuation for it. But I’ll give you a few things to think about below;

From the description up thread this sounds like the company has the ability to call the bond (I’ll just call it a bond for now) in 2026 but otherwise matures 2081. In order to value it, a minimum, we need the coupon interest %, the call date, any other call dates and what they are obliged to pay you if they call the bond.

It is priced lower (yield higher) than a straight bond because the investor is short the call. Rogers owns the call, which has value, and this value is subtracted in the valuation exercise from what the bond would otherwise be worth. All else being equal. The value of the call of course depends on the probability of being exorciseable at expiration, interest rate volatilities, time value of money, etc

If, when it is called, the investor gets shares instead of cash, then we also have the complexity of valuing those, in terms of how they impact the call value. And the volatility of this valuation.


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## Tostig (Nov 18, 2020)

Covariance said:


> You really need to look at the specific terms of this security to get to a valuation for it. But I’ll give you a few things to think about below;
> 
> From the description up thread this sounds like the company has the ability to call the bond (I’ll just call it a bond for now) in 2026 but otherwise matures 2081. In order to value it, a minimum, we need the coupon interest %, the call date, any other call dates and what they are obliged to pay you if they call the bond.
> 
> ...


Ok. Thanks for the details.


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## Money172375 (Jun 29, 2018)

Tostig said:


> Geez. I'm only asking questions. Not like there's a gun to my head to buy.
> 
> There are people willing to switch to Tier pricing on electricity to save a whopping $30 a year.


I believe it was $30 a month, but I digress.


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