Aviva 8 3/8% Pf Discussion Threads

[yf23_1] 05/7/2024 16:44

I've been over-allocated in bonds/prefs for a while so I don't want to add any more and I'd be quite happy if they don't get cancelled. They provide a nice income stream.

[return_of_the_apeman] 05/7/2024 14:19

yf23_1, sadly not enough other holders agreed with you, which has now shrunk the FI universe by another 1. On the plus side, given your thinking surely you are pleased that there are many other prefs/pibs at bargain prices. Here for example and over 7.5% can be found elsewhere

[yf23_1] 05/7/2024 00:58

I don't think the RSAB was "tendered at attractive enough terms". Article in the IC (JUn 21) seems to agree.
Takeout at 6% when the longest term gvt bond (2071) yields 4.3%. Too big a gap if you ask me, especially as short interest rates set to fall.

[return_of_the_apeman] 04/7/2024 12:27

Won't be classed as Tier 1 capital after 2026 for insurance companies, it has not been classed as Tier 1 capital for banks for some time already.

However you are right, it is an expensive form of debt which is cheap to retire now or replace, so banks and insurers are taking advantage. BOI, LBS and RSAB have tendered at attractive enough terms to get rid of this form of debt lately using the BOI playbook.

More to come for sure as interest rates fall this debt becomes more expensive so the clock is ticking, however for Aviva they might have an additional hurdle, check out if they need a special resolution to buy back more than 5%

[jam62] 04/7/2024 11:59

Aviva plc €700,000,000 3.875 per cent. Dated Tier 2 Reset Notes (ISIN: XS1083986718, Common Code: 108398671) Cancellation of Listing


Aviva plc (the "Issuer") announces that it has, on 3 July 2024, in accordance with the Terms and Conditions of the Notes, redeemed the Notes in full and that the listing of the Notes on the London Stock Exchange has been cancelled with effect from (and including) 4 July 2024.

Interesting, and perhaps indicative of the balance sheet strength and what is to come.

[jam62] 04/7/2024 09:14

As yf23_1 has stated, as a result of an eu directive some 3 years ago, preference shares will be eliminated from the calculation for Tier 1 capital.

I have not calculated the total existing Preference capital, but I would guess that insurance companies and banks account for 75%-plus of the total.

In a nutshell, insurance companies and banks have two incentives, regulatory and financial, whereas non-financial corporates only have to consider the financial criteria. However, more than halving the cost of that category (pref) is a tremendous incentive.

[yf23_1] 04/7/2024 08:35

won't be classed as Tier 1 capital after 2026.

[rik shaw] 04/7/2024 06:45

Ok but I don't understand how that links to 'regulatory changes happening in 2026'

[jam62] 03/7/2024 18:05

rik shaw

I deliberately said all because of one other very important consideration.

All preference issues in the U.K. have relatively high “coupons”; and payments are dividends. The dividends are paid out of post-tax earrings and by implication have not been offset against the company’s corporation tax liability.

BP for example has a preference issue with a 9% “coupon” and Bristol & West has an 8.125% issue. Assuming both companies have corporation rax charges of say 20%, the real cost of these dividend payments is 11.25% and 10.16% respectively.

If these issues were to be replaced by, say, 5% debentures, the coupons would not only have a lower coupon cost, they would also qualify as being offsetable against corporation tax; again taking a 20% tax charge would mean 4% net charge for both companies.

[rik shaw] 03/7/2024 16:43

When you say 'all companies that have prefs will want to eliminate them', this may be true for financial firms but it is not true for non financial.

[jam62] 03/7/2024 13:31

All prefs are well bid today. For example you can currently sell AV.B for 133.2p in size. Other issues are equally well bid.

Given regulatory changes happening in 2026, all companies that have prefs will want to eliminate them from their balance sheets. The parent company holding RSAB started the process a couple of week ago by bidding a small premium through a tender process.

Expect further attempts by other companies to do something similar. A more attractive premium will be necessary for a successful outcome.

[yf23_1] 03/7/2024 13:18

Probably more to do with possible tender offers in the future.

[magnets] 03/7/2024 09:29

gilt yields rising, prefs falling?

[yf23_1] 03/7/2024 08:02

Strange goings on with the share price yesterday.

[jubberjim] 20/6/2024 05:50

I see a bit of pot kettle by AW1

This one Av. is holding up the best

Lgen and Phnx riven by uncertainty which I see continuing until after the election

No real incentive to buy while said situation persists.

[yf23_1] 12/6/2024 14:54

I see, RSAB tender gives about 6.04% yield.

[cwa1] 12/6/2024 13:32

No, just the RSAB tender announced this morning

[yf23_1] 12/6/2024 13:30

Price has suddenly come alive.
Is that investors exiting LGEN and buying here and the other prefs ?

[skyship] 05/6/2024 11:29

Yields at offer prices:

# AV.A 8.75% @ 135.0p-137.2p = 6.38%
# AV.B 8.375% @ 126.5p-128.0p = 6.54%
# GACA 8.875% @ 131.3p-131.9p = 6.73%
# GACB 7.875% @ 116.0p-116.9p = 6.74%

AV.A & GACA both go XD tomorrow (06/06/24)

[yf23_1] 04/2/2024 20:29

FYI
ex record paym
8 ¾% 28 Nov 24 29 Nov 24 31 Dec 24*
8 ⅜% 05 Sep 24 06 Sep 24 30 Sep 24*
8 ¾% 06 Jun 24 07 Jun 24 30 Jun 24*#
8 ⅜% 29 Feb 24 01 Mar 24 31 Mar 24*#

[crt131] 30/1/2024 13:22

Since Skyship not around for a while I will have a go..

Prices based on buy price of 10K Shares and not including tax or dealing costs.

AV.A - 129.48 (6.76% yield)
AV.B - 126.80 (6.60% yield)
GACA - 126.24 (7.03% yield)
GACB - 118.05 (6.67% yield)

As usual GACA appear best bet, but also consider that they don't go ex-div until June.

Cheers
CRT

[skyship] 29/11/2023 11:16

Yields at offer prices:

# AV.A 8.75% @ 131.65p-133.3p = 6.56%
# AV.B 8.375% @ 121.25p-123.5p = 6.78%
# GACA 8.875% @ 124.0p-125.5p = 7.07%
# GACB 7.875% @ 112.0p-114.0p = 6.91%

AV.A & GACA both go XD tomorrow (30/11/23)

[misterd1] 06/10/2023 14:01

Should Aviva be taken over then what could I reasonably expect for my AV.B holdings?

Would they be bought at a premium too?

[yf23_1] 04/9/2023 22:41

Nice rise today ahead of ex-div on Thursday 7/9 (paid 30/9).
Going to look cheap when interest rates recede as they surely must.