EFTA02671084.pdf

From: Richard Kahn < Sent: Monday, November 9, 2015 9:26 PM To: jeffrey E. Subject: Fwd: Royal Bank of Scotland 7.64% Fixed-to-Float Pfd Attachments: RBS.Bonds.2.24.15.pdf; Untitled attachment 00459.htm thought this was interesting as it would =ield foreign interest income please =dvise thank you Richard Kahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 tel fax cell = Begin forwarded message: From: =/b>"Atlas, Andrew 5" < Subject: =/b>Royal Bank of =cotland 7.64% Fixed-to-Float Pfd Date: =/b>November 9, 2015 at 4:03:19 PM =ST To: =/b>"Richard Kahn ( I" < Rich, Here's an attractive Yield to Call opportunity that I =anted to show Southern Trust Company. I've attached a =till relevant Morgan Stanley note from earlier this year. EFTA_R1_01939811 EFTA02671084  Details: Royal Bank of Scotland 7.64% Fixed-to-Float Preferred =hares RBS=7.64% Perpetual Issuer: Royal Bk Scotland Grp Plc Par=Value: =1,000 Security Type: Preferred Stock QDI/DRD =ligible Yes = Yes Cumulative: =on-Cumulative Rating: B1 / B+ Coupon =Details): =.64% to 9/30/2017; Then US 3M Libor +232bp, resets Quarterly &nb=p; =nbsp; &n=sp; Next Call Date: 9/30/2017, Quarterly thereafter Maturity: =nbsp; &n=sp; Perpetual Net==rice: &n=sp; &nbs=; 105.25 Current =ield: &n=sp; 7.2589% Yield to Next =all: =.6871% Some of Morgan Stanley's highlights: 1. They fundamentally like the credit and this is one of the =ost liquid and highest yielding legacy securities (old-style AT1s) 2. They expect the bond to get called at first call because: &nb=p; &=bsp; &nb=p; = i. =/span>RBS=has excess Tier 1 capital and RBS is issuing AT1 which is further =ncreasing this excess &nb=p; &=bsp; &nb=p; = ii. =/span>The=7.64s are expensive. RBS does not get a tax benefit so the coupon =s 1.2x higher for the issuer than the headline coupon*. 2 EFTA_R1_01939812 EFTA02671085  &nb=p; &=bsp; &nb=p; iii. =/span>The=7.64s are only callable every 10 years so missing the opportunity in =017 reduces all flexibility for the issuer when it loses all capital value from end-2021. 3. They think that the 7.64$ could get tendered for or exchanged =t favorable terms, but are happy with the carry they offer even if they =re not. * =ote the back end of 3m1+232 grossed up for tax is closer to 3m1+300 for =he issuer. &nb=p; &=bsp; &nb=p; Please treat all price levels as subject to market =vailability. Let me know if you have any questions. Speak soon, Andrew Andrew S. Atlas Financial =dvisor Equity Sales/Middle Markets Group Morgan Stanley Wealth Management Midtown Manhattan =omplex 1290 Avenue of the =mericas, 12th Floor I New York, =Y 10104 Tel/Direct: Fax: <mailto Important Notice to Recipients: 3 EFTA_R1_01939813 EFTA02671086  Please do not use e•mail to request, authorize or effect the purchase or sale of any =ecurity or commodity. Unfortunately, we cannot execute such instructions provided =n e-mail. Thank you. The sender of this =-mail is an employee of Morgan Stanley Smith Barney LLC ("Morgan Stanley"). If you have =eceived this communication in error, please destroy all electronic and paper =opies and notify the sender immediately. Erroneous transmission is not intended to =aive confidentiality or privilege. Morgan Stanley reserves the right, =o the extent permitted under applicable law, to monitor electronic =ommunications. This message is subject to terms available at the following link: http://www.morganstanley.com/disclaimers/mssbemail.html.&nb=p; If you cannot access this link, please notify us by reply message and we will send the =contents to you. By messaging with Morgan Stanley you consent to =he foregoing. 4 EFTA_R1_01939814 EFTA02671087