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Navra Warrants

Discussion in 'Managed Funds & Index Funds' started by ActiveTrade, 21st Jul, 2008.

  1. ActiveTrade

    ActiveTrade Well-Known Member

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    Just curious ... has anyone actually switched over to Navra Warrants from their Margin Loan ?

    Just curious ... I have and it's all made sense up until now. The new hybrid product will be automatically deducting 30% of each distribuition to pay down the loan. :eek:

    The main challenges I am seeing so far vs a ML :

    1) Distribuition gets paid a week later (Still have not rec'd 4th qrtr distribuition).

    2) I am unable to manage my LVR until each reset date

    3) I am unable to negotiate a better int rate

    4) The 90% Margin Call is great buy my understanding is that St George offers close to it.

    I would be interested in hearing others views here as I don't feel this topic has been discussed in too much detail before.

    On a separate topic ... what is the best site for ML rate info for the Navra Fund ?
     
  2. bundy1964

    bundy1964 Well-Known Member

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    INFOCHOICE | Investment | Margin Lending | Compare

    First I have heard of them being available for Navra, may be easier than a margin loan and it allows for a low 2k start. I am guessing it is the ABN AMRO product you are talking about?
     
    Last edited by a moderator: 21st Jul, 2008
  3. ActiveTrade

    ActiveTrade Well-Known Member

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    Thanks Bundy. I tried searching managed funds under code NAV0001AU and can't seem to find a match. Is there another code the fund goes by.

    Yes - I am referring to the ABN AMRO product.
     
  4. bundy1964

    bundy1964 Well-Known Member

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  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Try this for LVR info: Comparing Lenders - NAV0001AU ... but you then need to go to the individual ML sites (or InfoChoice) to get their rates.
     
  6. OLI

    OLI Well-Known Member

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    After reading all the posts on the Navra forum I think I've finally got my head around Hybrid warrants!

    Has anyone here switched from a margin loan to these Navra warrants? Is there a delay between selling out of the margin loan and buying into the warrants, for example if it takes a few days to process the unit price might increase in this time and you could lose out? Or does the changeover work differently to this?
     
  7. D&K

    D&K Well-Known Member

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    Did this some time ago, fortunately, and I think it pretty much switched in the day as the units transferred rather than selling out and buying in (with some adjustments). It was just that the actual day it occurred was more up to the finance entities (margin lender and ABN AMRO) rather than our choosing. Still it happened fairly quickly, coordinated through the Navra team, quite painless.

    Cheers, Dave
     
  8. MrDarcy

    MrDarcy Well-Known Member

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    Can you give any details of costs and fees for doing a transfer of units ("borrowing fee" etc)? Also, as a transfer this wasn't a sale and buy back was it (so not a CGT event)? Thanks.
     
  9. OLI

    OLI Well-Known Member

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    After reading the PDS I was wondering the same thing. Isn't there a 2.2% borrowing fee for the Warrants?

    D&K, how did this affect your position in regards to the number of units held?

    Was the transfer paperwork you completed a 'Unitholder Application' to 'convert your underlying units into unlisted rolling instalments'?
     
  10. OLI

    OLI Well-Known Member

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    OK, how about this for an example:

    Navra Income Fund - $100K
    Current Navra Unit Price - 0.70cents
    Units held - 142,857
    Margin loan (at 85% LVR) - $85K
    Margin call at 86%

    The above units are converted/transferred to the Navra Hybrid Warrant series B as follows:

    Current Loan Amount (from the ABN AMRO website) - 0.618cents
    Stop Loss Level - 0.6799cents

    Units transferred - 142,857
    Value of Instalment warrants - $100K
    Loan Amount (based on 0.618cents) - $88,286
    1st Instalment amount - $11,714
    "Borrowing fees" at 2.2% - $1,942
    Cashback amount - $88,286 minus $1,942 = $86,344.

    The $86,344 is then used to repay the $85,000 margin loan leaving $1,344 left over.

    The new LVR on your warrants is 88.3% but the Stop Loss Level is now at 90% LVR. It has cost you $1,942 to move from a margin loan to a (non-recourse) instalment warrant.

    Is this pretty much how it works? Do my figures look correct?
     
  11. seaview

    seaview Well-Known Member

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    Did you know that several folk with Navra Warrants were called last week to inject more cash as the automatic stop loss was triggered during the crash? :eek:
    I prefer my St George margin loan and feel more able to manage my own LVR (up to 85% max)to avoid margin calls. It also costs me less. I found it hard to get my head around all the PDS small print and am glad I avoided it now. Just my thoughts. I am sure it works fine for some people, especially those opting for low LVRs.
     
  12. OLI

    OLI Well-Known Member

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    Seaview, any idea how much cash they had to inject? What level was the new stop loss set at?
     
  13. seaview

    seaview Well-Known Member

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    Sorry but I don't know any details. A friend of mine had about 150k of units at the max limit (not sure what that was) and was asked for about $10k ... and she said there were many others. BUT that was before Friday's crash, so I wonder if they will get another call.
     
  14. Saskatoon

    Saskatoon Well-Known Member

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    seaview,
    at Steve's presentation in Melbourne last Wednesday he indicated, if I remember correctly, that only 3% of his clients had received the call. My understanding is that they had been more aggressive in their original LVRs. If the market rise in the last two days is maintained there may not be any more.

    Terry
     
  15. D&K

    D&K Well-Known Member

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    Only a small number of holders of the A warrants got calls. I think most people have B warrants and we did not receive calls. There is a warning level before the call and the warnings weren't given either. A call requires injection of funds or sell down to restore a 10% buffer.

    The big advantage of hybrid warrants over a margin loan is that your losses are still limited. On a margin loan if the share value drops too far, they sell all your shares/units and you still owe the bank money. The hybrid warrants have a much better sleep at night factor.

    HTH, dave
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The main protection from a non-recourse loan like these is in a situation where you have a major market crash in a single day (eg 1987 crash) where at the end of the day's trade your investment is worth less than the loan balance. With a margin loan you would not only be forced to sell at a loss, you would need to pay back the loan shortfall too.

    A non-recource warrant product would see your losses limited to your initial capital investment - you would not be forced to pay back the loan shortfall as well.
     
  17. ffc1883_1996

    ffc1883_1996 Active Member

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    Do the warrants go on forever (like a margin loan) or do they expire after a period of time?
     
  18. voigtstr

    voigtstr Well-Known Member

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    Oli, I only have small parcel of units in Navra at the moment, (life got in the way of investing in funds/shares). If starting from almost scratch, how much money do you need to invest in the navra warrants? (is there a minimum?)
    eg can you start from 5k, 10k, 20k? And if assuming a 10% return from the units, how much do I need to invest to reduce the negative gearing costs on our IP (approx 8k a year). I dont know how the gearing level works with warrants.
     
  19. OLI

    OLI Well-Known Member

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    They are for 2 years but they are 'Rolling' Instalment Warrants so can be rolled over to a new warrant in 2010 (with a small cash adjustment).
     
  20. OLI

    OLI Well-Known Member

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    The minimum investment amount is $2,000. The gearing level is based on the Loan Amount figure for each series of warrant which is set up front. For example, the Series B warrant had a Loan Amount of 60 cents so with a Navra unit price at 71 cents you would be geared to 84.5%. You have no control over your LVR (everyone in that particular series has the same level of gearing) so it's important to hold a cash buffer if you want the same protection a lower gearing level would give you.

    Note - the interest on the instalment warrants is capitalized so the current Loan Amount figure on series B now stands at 61.77 cents.

    30% of distributions from the Navra fund are automatically used to reduce the Loan Amount on the warrants so you need to factor that in when you calculate how many units you need to cover your $8K of (IP) holding costs. I'll let someone else have a go at the actual figures!