Aviva 8 3/4% Pf Discussion Threads

[skyship] 03/11/2021 09:04

Rapid change in sentiment, especially as regards the lead pref - AV.A - which at one stage was down to an offer price of 143p!

Yields at offer prices:

# AV.A 8.75% @ 152.25p-156.0p = 5.61%
# AV.B 8.375% @ 145.0p-150.0p = 5.58%
# GACA 8.875% @ 149.0p-152.0p = 5.84%
# GACB 7.875% @ 132.3p-134.0p = 5.88%

[skyship] 18/10/2021 15:39

Yields at Offer prices:

# AV.A 8.75% @ 148.0p-150.0p = 5.83%
# AV.B 8.375% @ 140.0p-143.6p = 5.83%
# GACA 8.875% @ 148.0p-150.1p = 5.91%
# GACB 7.875% @ 130.0p-131.65p = 5.98%

So, the 6% attracted a few buyers.

[8w] 12/10/2021 15:36

Av.a and b trade at 6% yield. Ella @ 5.5%.
Always a premium price for dear old Ella

[cc2014] 12/10/2021 07:52

#816&822

The most recent evidence for buyback of prefs comes from NWBD 9% Prefs which NatWest did a tender for about 3 months ago. The tender offer was 176p plus the accrued interest and the bid/offer at the time was around 167p-175p. Given that you could sell within the spread before the tender, NatWest effectively offered around a 4% premium to redeem them.

Acceptance on the offer was around 20%.

[cc2014] 12/10/2021 07:35

#818

In a rising interest rate environemnt you will need to be comfortable that the running yield outweighs the capital losses by enough to make it worth your while.

This has worked well for the last 2 decades for pref holders as interest rates have fallen from 15% to 0%. If you believe the central banks have the power to indefinitely control the market and intend to take interest rate to -15% if things get tough the prefs will continue to be the place to be.

Over the last few weeks the market outlook on interest rates has changed dramatically due to a number of factors but principally the inflation data and comments from the central banks about interest rates rising sooner than expected and money printing stopping sooner than expected.

The yield on the UK 10 year gilt which one might see as some very vague proxy for pref returns (maybe the 25 year would be better?) has moved from 0.5% to 1.2% in the last month. Therefore whilst interest rates are not the only thing that affect pref prices, the pref prices have had to fall to keep a similar yield above long term gilt returns.

I also perceive the prefs were being priced to perfection by PI yield hunters struggling to find yield in a low interest rate environment. Some of that may have come out of the price but the prefs still look overvalued to me. I don't own any and won't be buying even at these lower prices. All over the market there is evidence of fixed income prices puffed up by a desperate hunt for yield. The prefs are no exception.

[yf23_1] 12/10/2021 06:58

But then there's always the chance that Aviva will make an attempt to buy them in at a decent price.

[andyj] 12/10/2021 00:42

Agree. In the period 1993 to 2008 when interest rates averaged 5%, AV.A averaged 120, with two brief forays above 140. At that price they yield 7.2%. As an expat, higher interest rates in the UK are great news. These have always been one of my favourite safe harbours for profits and the recent fall seems an overreaction, but it is hard to see them recovering much while the threat of interest rates and inflation hangs over them. I will wait a little longer.

[yf23_1] 11/10/2021 22:03

Its just interest rate expectations, although I don't see an increase from 0.1% to 0.5% as such a big deal. Its probably the thought of the current price increases being non-temporary in nature.

[dlp6666] 11/10/2021 20:53

Maybe they'll now start buying some up at 145p to save them having to fork out c.194p on a general offer further down the line.

[mikealig] 11/10/2021 16:38

Thanks for the replies. The big drop today is worrying and suggests that they may have something underhand planned that has been leaked IMHO

[future financier] 11/10/2021 16:33

"At least that was how things used to work." - in the days before some sharp MBA type at Aviva decided they could legally cancel the shares at par without the pref shareholders having any say in the matter. Saved only by the moral stance taken by Ecclesiastical Insurance and others.

[skyship] 11/10/2021 15:48

They would just make a general offer to buy them in on what they would consider a fair yield - say 4.5%; ie 194.4p for AV.A - c35% up on today's price.

If they receive 90% acceptance then they can compulsory purchase the balance. At least that was how things used to work.

[mikealig] 11/10/2021 15:38

Could someone more knowledgeable than me advise how these instruments would be removed please? Can Aviva set a purchase price and we have to accept it?
TIA

[skyship] 11/10/2021 12:59

Yields at Offer prices:

# AV.A 8.75% @ 143.0p-143.95p = 6.08%
# AV.B 8.375% @ 137.0p-137.8p = 6.08%
# GACA 8.875% @ 147.0p-148.35p = 5.98%
# GACB 7.875% @ 134.0p-134.5p = 5.86%

So, the 6% yields perhaps came a bit quicker than expected...

[skyship] 11/10/2021 12:47

Last 3 sales averaged 143.1p....yield at 6.11%.

[future financier] 11/10/2021 11:36

5.993% currently ......

[nerja] 11/10/2021 10:49

Brutal moves the last month or so on the prefs, how far are they going to drop into a buy zone again, got to have a 6% yield at least for me.

[skyship] 05/10/2021 14:49

Yields at Offer prices:

# AV.A 8.75% @ 150.0p-150.9p = 5.80%
# AV.B 8.375% @ 143.0p-143.0p = 5.86%
# GACA 8.875% @ 150.0p-150.9p = 5.88%
# GACB 7.875% @ 135.0p-135.2p = 5.82%

Price spreads closest I've ever seen; even choice in the case of AV.B.

Might we see 6% yields again here soon...

[skyship] 14/9/2021 19:23

nisbet - logic would suggest; but logic never dictates!

[nisbet] 14/9/2021 19:20

Skyship

The cost of servicing all four preference issues is close to 11% a year. This quasi debt is not offsettable against corporation tax, so is hugely expensive to Aviva. Completion of disposals by Aviva over the next few months will result in around £7bn available for distribution, and I believe that it is only a question of when and how much will be offered to shareholders in an effort to finally remove these instruments from the balance sheet.

The fall in the Pref. share prices will be looked upon as a well timed opportunity to facilitate an action that has been well signposted for some time.

[alphorn] 14/9/2021 15:48

Close to LLPE yields.

May be capital values down because of interest rate expectations too???

[cousin jack] 14/9/2021 15:18

I'd not noticed the recent falls.They seem specific to the Aviva/GA prefs so Skyship's suggestion of a non call leaking out could well be right. I'm sure most holders are quite happy to keep collecting the income though.

[skyship] 14/9/2021 15:01

Some nibbling going on this afternoon.

Personally I've decided to wait it out. The plummet through the 160p support suggests to me that a decision has been made not to repay the prefs; and that information leaked out.

Where to now? Well the support at 142.5p would offer a 6.14% yield. That might tempt me for a small allocation


free stock charts from uk.advfn.com

[dlp6666] 14/9/2021 13:17

@Skyship

How low would they need to go to tempt you to invest?

Or is their future just too uncertain?

[skyship] 14/9/2021 12:50

Yields at Offer prices:

# AV.A 8.75% @ 150.0p-151.Op = 5.79%
# AV.B 8.375% @ 146.0p-147.0p = 5.70%
# GACA 8.875% @ 154.0p-156.0p = 5.69%
# GACB 7.875% @ 134.0p-136.0p = 5.79%

Some pretty torrid and I daresay rather surprising falls across the pref piece. A c9% fall in the leader (AV.A) in just 6weeks.

Personally no views one way or the other...