ICG - Why redeemable shares ?

nummus

Hi,

I'm potentially intersted in buying some ICG units, can anyone explain to me the implications of the redeemable share portion of the unit.

Can the company buy the redeemable portion back at a price of their choosing. What are the pros and cons of such an arrangement.

Thanks Paul.

ofjames

I know Grafton group also issue redeemable shares as part of their 'unit' of stock. In their case, I think you get 20 redeemable class 'C' shares in each unit.

The purpose of these shares is as follows. Instead of paying a dividend, the company buys back one of the redeemable shares contained in each unit.

I'm open to correction on this but I would think the pro for the investor on arranging distributions this way is that the repurchase would be treated as a part-disposal of the shareholding and thus charged to CGT @ 25% rather than being charged to income tax at the marginal rate as is the case with dividends.

It could very well be the case that ICG operate a similar mechanism

nummus

Thanks for the reply, but this still doesnt make sense to me as ICG have paid a normal dividend for the last three years.

So again i ask what is the point of this arrangement ?

Paul.

ofjames

http://www.icg.ie/investors-information-icg-units.asp

Its pretty much as I described with Grafton alright. The redeemable shares are there as an alternative to a regular dividend for returning cash to shareholders.

"From time to time, the Board of Directors, at its own discretion, may redeem some or all of the Redeemable Shares at a premium over their nominal value. Any such redemptions will be in cash and, if any such redemptions take place, it is unlikely that a dividend would also be paid, and vice versa."

nummus

I still dont see the point of this, why put this option in and then pay a regular dividend anyway ?

There surely must be other reasons for this arrangement ?

Anyway i dont think I'll bother further with these, seems over complicated for no apparent reason.