"Hi Madamswer How do you justify holding this- or do you mark it...

"Hi Madamswer
How do you justify holding this- or do you mark it off as an occasional misfire?"

Apologies for the misunderstanding: I own CARES, the convertible prefs. (ASX code: RHCPA), not the head stock.

The evolution of my investment in RHC is that I owned the ords for many years and during the GFC the convertibles fell to 25% discount to face value which was therefore a far cheaper entry into the stock at a time when the headstock itself was cheap. So I bought the prefs.

Between 2018 and 2021, convinced that the prefs were going to be converted at the elevated valuation multiples, which would leave me heavily overweight the stock, I sold out of RHC headstock.

But to my sheer surprise, the Board chose to not swap not-cheap debt for cheap equity. Not even when the share price spiked even further following the KKR approach did they blink.

And today - with the 180- day BBSW at 4.50% and the pref dividend priced at a 485bp spread above that - the coupon on that debt is a whopping 9.3% on par value [*]. So what started out as a not-so-cheap source of funds, is today very expensive money.

So I continue to expect to be converted. Financially savvy management would do so (in fact, would already have done so years ago...it's almost as if someone is holding a gun to the collective heads of directors, threatening to pull the trigger if they proceed with the conversion).

[*] Even at the current RHCPA market price, the running yield is 8.7% (Pre-Tax) and 6.1% net of tax (so, fully franked).