EFTA02480982.pdf

From: jeffrey E. <jeevacation@gmail.com> Sent: Monday, November 9, 2015 9:28 PM To: Richard Kahn Subject: Re: Royal Bank of Scotland 7.64% Fixed-to-Float Pfd million On Mon, Nov 9, 2015 at 10:25 PM, Richard Kahn <mailt°a > wrote: thought this was interesting a= it would yield foreign interest income please advise thank you Richard Kahn HBRK Associates Inc. New York, NY 10022 tel 212-971-1306=/a> fax <tel cel <tel Begin forwarded message: sn <=iv style="margin-top:0px;mar in-ri ht:0 x•rnar in-bottom:0 rmargin-left=px">From:"Atla=, Andrew <mailto » Subject: Royal Ba=k of Scotland 7.64% Fixed-to-Float Pfd Date: November 9, 2015 at 4:03=19 PM EST To: =/s an>"Richard Kahn &=t; Rich, <mailto }.. EFTA_R1_01597173 EFTA02480982 =span style="font-family:"Cambria","serif"">Here40=804>s an attractive Yield to Call opportunity that I wanted to show South=rn Trust Company. I've attached a still relevant Morgan Stan=ey note from earlier this year. Details:</=> Royal Bank of Scotland 7.64% Fixed-to-Float Preferred Shares<=> RBS 7.64% Perpetual Issuer:=C20 Royal Bk Scotland Grp Plc Par Value: =C24> $1,000 S=curity Type: Preferred Stock QDI/DRD Eligible4e=A0 Yes / Yes<=> Cumulative: Non-Cumulative Rating: B1 / B+ Coupon (Details): =C24> 7.64% to 9/30/2017; =hen US 3M Libor +232bp, resets Quarterly 4>=A0 4>=A0 =C24> Next Call Date: 9/30/2017, Quarterly thereafter=/u> Maturity: =C24 4>=A0 Perpetual <=>Net Pri=e: =C24 4)=A0 105.25 Current Yield: =C24> 40=A0 7.2589% Yield to Next Call: =C24> 4.6871% Some of Morgan Stanley's highlights:<=> 1.<=pan style="font:7.0pt "Times New Roman—> 40=A0 They fundamentally like the credit and this is one of the most =iquid and highest yielding legacy securities (old-style AT1s) 2 EFTA_R1_01597174 EFTA02480983 2.<=pan style="font:7.0pt "Times New Roman""> 4>=A0 They expect the bond to get called at first call because: Q=AO =C24> 4>=A0 =C24> 40=A0 i. 4>=A0 RBS has excess Tier 1 capital and RBS is =ssuing AT1 which is further increasing this excess 4>=A0 =C24> 4>=A0 =C2* Q=AO ii. Q=A0 The 7.64s are expensive. RBS does n=t get a tax benefit so the coupon is 1.2x higher for the issuer than the h=adline coupons. 4>=A0 =C24> 4>=A0 =C2* 4>=A0 iii. 4>=A0 The 7.64s are only callable every 10 year= so missing the opportunity in 2017 reduces all flexibility for the issuer=when it loses all capital value from end-2021. 3.<=pan style="font:7.0pt "Times New Roman""> 4>=A0 They think that the 7.64s could get tendered for or exchanged a= favorable terms, but are happy with the carry they offer even if they are=not. * Note the back end of 3m1+232 grossed up for=tax is closer to 3m1+300 for the issuer. 4>=A0 =C24> 40=A0 =C2* 4>=A0 Please treat all price levels as subject to market avail=bility. Let me know if you have any questions.<=p> 40.=A0 Speak soon, Andrew 4>=A0 Andre= S. Atlas Financial Advisor=/i> Equity Sales/Middle Markets Group Morgan Stanley=Wealth Management Midtown Manhattan Complex 1290 Aven=e of the Americas, 12th Floor I New York, NY 10104 Tel/Direct: <tel Fax: <mailto 3 EFTA_R1_01597175 EFTA02480984 Important Notice to Recipients: Please do not use e-mail to request, authorize or effect the purchase or sale of any security=or commodity. Unfortunately, we cannot execute such instructions provided in=20 e-mail. Thank you. The sender of this e-mail is an employee of=20 Morgan Stanley Smith Barney LLC ("Morgan Stanley"). If you =ave received this communication in error, please destroy all electronic and paper copies=and notify the sender immediately. Erroneous transmission is not intended to wa=ve confidentiality or privilege. Morgan Stanley reserves the right, to t=e extent permitted under applicable law, to monitor electronic communications= This message is subject to terms available at the following link: http://www.morganstanley.com/disclaimers/mssbemail.html.,=A0 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 the=20 foregoing. please note=br> The information contained in this communication is confidential= may be attorney-client privileged, may constitute inside information, =nd is intended only for the use of the addressee. It is the property of=br>JEE Unauthorized use, disclosure or copying of this communication=or any part thereof is strictly prohibited and may be unlawful. If you =ave received this communication in error, please notify us immediately =y return e-mail or by e-mail to jeevacation@gmail.com <mailto:jeevacation@gmail.com= target=> , and destroy this communic=tion and all copies thereof, including all attachments. copyright -all =ights reserved 4 EFTA_R1_01597176 EFTA02480985