Depositors are in the fifth position

Deposits are treated as unsecured creditors, bond holders are secured creditors

This is from investopedia. With this bondholders will be paid before depositors

maishai:
I need a bond that can pay me @ least 15% per annum for the next 9 years..........



Hopefully a bond thread will be opened, I read in a lot of annual report companies paying off bonds and the least coupon they pay is 13%.


That are never advertised

There is a bond thread. Primero is giving 14%.

Lazyyouth4u:


The bolded has got absolutely nothing to do with a bank’s capital structure.

Bonds issued by banks are not more secured than depositors funds. I don’t know where you are getting this from.

Let me get this, you saying in the event of liquidation depositors are paid fist before bond holders?

emmanuelewumi:



It used to be Bank of the North. Northern State governments are the majority shareholders of the bank

No wonder they are still operating.

emmanuelewumi:
This is from investopedia. With this bondholders will be paid before depositors

You are comparing a corporation to a bank?

emmanuelewumi:



We have sovereign and corporate bonds.

Sovereign bonds are issued by countries, while commercial papers and corporate bonds are issued by businesses

I tire o

emmanuelewumi:



Representative of the issuer of the bond ie Trustee is represented on the board of the company if the debt is substantial to the business capital structure, they also have representatives on the investment, risk management and other important committees of the board.

Who are the representatives of the depositors on the board or important committees of the bank

Trustee has got absolutely nothing to do with this.

If you look at many of the bank financial statements, you will find that the bonds are stated as senior unsecured notes. These rank parri passu with depositors funds which are also senior and unsecured. So in the event of a liquidation, a holder of these bonds cannot have preference over depositors. So bonds issued by such banks are not more protected than depositors funds.

Some bank bonds are actually subordinated. And depositors will get their insured and uninsured deposits before such bond holders will smell anything.

Lazyyouth4u:


You are comparing a corporation to a bank?

Kindly Google the liquidation of a bank. Bond holders are secured creditors and will get 100% of their funds, depositors are unsecured creditors and can't get 100% of their funds. It is maximum of 500k in Nigeria

emmanuelewumi:


Kindly Google the liquidation of a bank. Bond holders are secured creditors and will get 100% of their funds, depositors are unsecured creditors and can't get 100% of their funds. It is maximum of 500k in Nigeria

Please check your banks’ financial statements and see if their bonds are senior secured obligations..

Lazyyouth4u:


Please check your bank’s financial statements and see if their bonds are senior secured obligations..

Can't find any. Share the one you have

Corporate bonds in Nigeria are secured.

Sovereign bonds are not secured, the security is the Goodwill and sovereignty of the country.

I am not sure if there are Trustees to Sovereign bonds

Reason why we have not witnessed any failure by corporate bond issuers in Nigeria

emmanuelewumi:
Corporate bonds are secured.

Sovereign bonds are not secured, the security is the Goodwill and sovereignty of the country.

I am not sure if there are Trustees to Sovereign bonds

My oga, not all corporate bonds are secured. Some are secured and some are unsecured. Some are senior unsubordinated while some are subordinated.

Please pick up one of the Banks Eurobond prospectuses or financials and skim through.

You can thank me later

emmanuelewumi:


Kindly Google the liquidation of a bank. Bond holders are secured creditors and will get 100% of their funds, depositors are unsecured creditors and can't get 100% of their funds. It is maximum of 500k in Nigeria

Just to clarify, deposit insurance is different from the priority of secured creditors.
In principle, the government through NDIC provides a guarantee and is supposed to pay all depositors up to that fixed amount irrespective of whether the bank's liquidation proceeds can yield that much.

As an aside, in the light of current nairanomics, 500k is a ridiculous amount, less than 1,000 pounds. In comparision, the FSCS guarantee in the UK covers up to 85,000 pounds per depositor per credit institution.

Cyberknight:


Just to clarify, deposit insurance is different from the priority of secured creditors.
In principle, the government is supposed to pay all depositors up to that fixed amount irrespective of whether the bank's liquidation proceeds can yield that much.

My mum's money is still trapped in Savannah Bank for over 20 years. The highest you can get is 500k.

That is what bank CEO's want. Thank God CBN has not allowed any bank to go under in the last 12 years, instead of going under CBN will take over the banks and the management, inject money into the bank and sell to other people.

Eg Afribank, Union Bank, Intercontinental Bank, Oceanic bank, Bank PHB, Fortune bank etc. Most of the fraudulent bank CEOs don't want this

emmanuelewumi:
Reason why we have not witnessed any failure by corporate bond issuers in Nigeria

Please have an open mind. Not all corporate bonds are secured and not all are senior.

Corporate bonds are not failing because in Nigeria, the bond investors are typically pension funds that can only invest in investment grade bonds.

Do you know there are high yield investors that invest in the subordinated instruments of private high risk companies in Nigeria that people do not hear of? If these high risk companies fail, you won’t know na.

In developed countries, there are some investors that specialize in investing in only junk bonds. They may lose money in many investments of companies that go bankrupt but when they clean out, they clean out big time.

Cyberknight:


Just to clarify, deposit insurance is different from the priority of secured creditors.
In principle, the government through NDIC provides a guarantee and is supposed to pay all depositors up to that fixed amount irrespective of whether the bank's liquidation proceeds can yield that much.

As an aside, in the light of current nairanomics, 500k is a ridiculous amount, less than 1,000 pounds. In comparision, the FSCS guarantee in the UK covers up to 85,000 pounds per depositor per credit institution.

So a business that has 1 million pounds will get maximum of 85,000 pounds

A bank won't go down in a year, it will give the signs of distress for up to 24 months.


As invesstors and bank customers we should always watch out for this.

That was what made me to sell my intercontinental bank, Union Bank, Afribank and Skye Bank shares before they were taken over by CBN.


Equally sold Oando shares about 8 years ago before their problems overwhelmed them

emmanuelewumi:



So a business that has 1 million pounds will get maximum of 85,000 pounds

Something like that yes.
There are also some exceptions which I don't remember, something along the lines of specific deposits getting full coverage for 4 to 6 months, etc.

emmanuelewumi:



So a business that has 1 million pounds will get maximum of 85,000 pounds

The US is $250,000

Lazyyouth4u:


The US is $250,000

That is the highest they can get


Will also be prorated. Those will $1000 might get $500, those will $10 million will get maximum of $250,000

Lazyyouth4u:


Please have an open mind. Not all corporate bonds are secured and not all are senior.

Corporate bonds are not failing because in Nigeria, the bond investors are typically pension funds that can only invest in investment grade bonds.

Do you know there are high yield investors that invest in the subordinated instruments of high risk companies in Nigeria that people do not hear of? If these high risk companies fail, you won’t know na.

In developed countries, there are some investors that specialize in investing in only junk bonds. They may lose money in many investments of companies that go bankrupt but when they clean out, they clean out big time.

This is true.
Junk bonds generally pay above-average yields, so if your appetite for risk is high, there are deals to be found.
Remember Michael Milken and the legalised scams he perpetrated at Drexel Burnham Lambert in the 1980s.

Lazyyouth4u:


I tire o

Thr is nothing to tire.I know they exist and the difference.The corporate entity,the state and lga in a country does not exist in isolation.If this entity financial obligations in the form of bonds,etc begin to fail or disappoint.That is still a big dent to the image of that country because of the regulatory approvals and supervision.This bonds are sometimes listed too on nse

emmanuelewumi:



That is the highest they can get


Will also be prorated. Those will $1000 might get $500, those will $10 million will get maximum of $250,000

I don't think deposit insurance is prorated.
If you have $1000, you get $1,000.
If you have $1,000,000, and the cap is $250,000, you get $250,000.

emmanuelewumi:



I equally wrote that 99.9% of microfinance banks can't satisfy SEC stringent requirements for bond issuance

That is because only few MFBs have national license. Most MFBs are unit MFBs with low capital base. The capital base of a national MFB is N5B.

Lazyyouth4u:


Please have an open mind. Not all corporate bonds are secured and not all are senior.

Corporate bonds are not failing because in Nigeria, the bond investors are typically pension funds that can only invest in investment grade bonds.

Do you know there are high yield investors that invest in the subordinated instruments of private high risk companies in Nigeria that people do not hear of? If these high risk companies fail, you won’t know na.

In developed countries, there are some investors that specialize in investing in only junk bonds. They may lose money in many investments of companies that go bankrupt but when they clean out, they clean out big time.

SEC does not allow junk bonds in Nigeria. The conditions to issue corporate bonds are very stringent in Nigeria. The bond Market is over 40 years in Nigeria and there is no report of any that went bad, I think that is highly commendable.

Pension fund managers came to scene about 15 years ago

emmanuelewumi:



That is the highest they can get


Will also be prorated. Those will $1000 might get $500, those will $10 million will get maximum of $250,000

No. They don’t prorate. You get your full amount up to 250k.

And yes it’s the highest they can get. That’s why financial advisers advise high net worth individuals to spread their free cash over the limit in different banks.

Lazyyouth4u:


You are comparing a corporation to a bank?

Now I tire too.I thought your argument was bonds issued by banks and depositts by customers rank equal.So which is corporation and bank

When Osun state had issues during the tenure of Aregbesola, bond invesstors earned their coupons of 15%.

This happened at a time when Civil servants were owed for over 12 months

emmanuelewumi:



SEC does not allow junk bonds in Nigeria. The conditions are very stringent in Nigeria. The bond Market is over 40 years in Nigeria and there is no report of any that went bad, I think that is highly commendable.

Pension fund managers came to scene about 15 years ago

More's the pity, maybe that's why SMEs are forced to rely on rapacious banks and FFF (family, friends and fools).

They should allow high-yield paper issues, maybe limit uptake to institutional and not retail investors.