Gen.acc.8se.pf Discussion Threads

[bisiboy] 10/3/2018 20:08

The statement talks about treating both classes of shareholders fairly
Fairly for the preference shareholders would be an offer to purchase at the same yield
As their longer dated debt. Look at the fair way that unilever behaved last year to shareholders
As was said most shareholders would have paid substantially more than par on reasonable expectations that the pref was irredeemable and only at risk if the institution was financially week
I find it very hard to believe that Avila board would try and stiff holders who are reliant on income many of whom are pensioners and expect them to do as they say and act fairly
The uncertainty is causing people unnecessary worry and they should now clarify their intentions in very short order

[par555] 09/3/2018 22:09

I held AV.A until yesterday ( fortunately had a stop loss I had placed a while ago so didn't lose too much) also hold RUSP, bizarre when a Russian based company seems a safer investment than a UK supposed blue chip one !

[edmundshaw] 09/3/2018 22:05

Well that "trick" has been around for 30 years. You can equally argue it is not fair that Aviva ordinary shareholders should be pouring money into interest on unnecessary and expensive debt that is losing half its original purpose as regulatory capital. Cancelling these shares has the House of Fraser precedent, and it is within the issue terms.

And btw only the non-GA shares are subject to ordinary Aviva shareholder vote. The GA ordinary shares are all owned by Aviva; I think we can guess how they will vote...

[davebowler] 09/3/2018 20:49

Good summary from Kenny;
Kenny9 Mar '18 - 00:48 - 326 of 362
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Not a holder here but Clause 4(i) seems quite clear that these are not redeemable and Clause 8(iii) states that the rights can only be varied on a vote of at least 75% of this class, for example, at least 75% of this class, in issue at the time, have to vote to be redeemed.

This seems totally at odds with the company's statement today "that we have the ability to cancel the preference shares issued by Aviva plc and GA plc, at par value......".

Tempting to buy some of these but, on balance, perhaps a little too risky because the company would have taken legal advice before making the statement it made today.

Not looked at the terms for any other class of preference shares. Clearly, the whole situation needs to be clarified by the company.
Kenny9 Mar '18 - 01:27 - 327 of 362
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Further to my posting above, I have read some commentary from the company, helpfully posted on another BB, which I think clarifies the "trick" AV. is proposing to use - see GACA board, post 180 and specifically this quote from one of the directors:

"So, while we have not taken any decisions, we note that these securities are subject to cancellation at par upon a capital reduction approved by ordinary and preferred shareholders voting as a single class."

Therefore, it appears they may propose a "capital reduction" and use such a proposed capital reduction to try and push this through under Clause 4(iii), namely, repayment at par. I think that is very sneaky and designed purely to circumvent the terms of Clause 4(i) and Clause 8(iii). A capital reduction scheme would also explain the reference to ordinary shareholders also being able to vote.

It is not in the spirit of the terms applying to these preference shares and is certainly not in the spirit of the historical use of a capital reduction. At the time those terms were drawn up, a capital reduction was more commonly used where a company was in trouble and it is proposed that preference shares "share the pain" by accepting a new class of shares or some reduction in their value or yield.

I have not looked at the terms of all the other preference shares of Av and GA but I would guess it is the same "trick" of a capital reduction that they will use on all of the classes - as the above directors' comment applies to all classes. Because ordinary shareholders also vote on a capital reduction, then preference holders votes will be swamped, so I am afraid that it is a done deal - the only hope is that the company offers something above par to sweeten the bitter pill (as they have hinted at?).

This deplorable action by this company is so worrying that I have re-examined the terms of the RUSP preference shares and can report they have no such terms, indeed, the term "capital reduction" is not once mentioned in the terms applying to those preference shares. This makes sense as that company is not incorporated under UK law albeit quoted in London. Incidentally, I was surprised that the various Lloyds preference classes also took a small hit but have not had time to check if there is any reference to "capital reduction" in their terms. Certainly for all UK company's preference shares we are all going to have to check the terms because if AV gets away with using this trick, no doubt others will follow to get rid of their high coupon preference.

This is all very underhand but it would take a brave judge to rule against the company's legal experts deployed to convince him to agree with the company's stance. Even if they lose, they would appeal to a higher court.

[davebowler] 09/3/2018 20:23

This is from the Aviva site today,innocuous enough-

As well as ordinary shares, Aviva has two different types of preference shares, 8 3⁄4% and 8 3⁄8%. The shares have a nominal value of £1. The fixed dividend is cumulative in nature, ie if the fixed dividend is not paid in one year, it accrues and is payable as a debt to the shareholder until the dividend is brought up to date. The shares cannot be redeemed without approval by shareholders at an Extraordinary General Meeting.

hxxps://www.aviva.com/investors/share-capital/ -under preference shares.

[edmundshaw] 09/3/2018 19:02

Also of interest. Not like the Lloyds bond case cited elsewhere at all... looks perhaps more relevant.

swarb.co.uk/house-of-fraser-plc-v-acge-investments-limited-hl-1987/

Ther argument can be distorted to say that preference shareholders should think themselves lucky that on a reduction of capital they get their money before other shareholders.

Holts, thanks for that. Relevant bit on p.6f Clause 4(iii) in particular. Looks on the money - for the GA prefs at least.

[davebowler] 09/3/2018 18:58

Thanks very much Holts for that link.
I can only find on page 7, section 6 a reference to buying back shares;
''on such terms as the Board shall determine''!!!

[holts] 09/3/2018 18:15

Dave

www.aviva.com/content/dam/aviva-corporate/documents/investors/pdfs/credit-investors/GA_Pref_Shares_140.pdf

[edmundshaw] 09/3/2018 17:52

Aviva made an announcement yesterday. Not much use, they said holders should consult their broker or financial adviser on what steps, if any, they should take. Probably that process would have been too slow! Here's the link:

www.aviva.com/investors/credit-investors/

[mac15] 09/3/2018 17:49

Second day of announcement by Aviva about their “preference shares” and no one really knows what’s going on or understands what Aviva’s intentions actually are. Are they really going to line up an X factor type vote with Aviva ordinary share holders voting against Aviva preference share holders and sending them home in tears with their nest eggs shredded? Hats off to Aviva for waiting until the Prefs reached their all time highs and sucking in hapless new investors before pulling this bunny out of the hat. Aviva need to be clearer on their plans and avoid comparison with Donald Rumdfeld

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

That sums up Aviva.

[wirralowl] 09/3/2018 16:56

Fair point, Specto.

But to raise the idea as they did, and then not act upon it until the share price falls to an average level they're happy to redeem at is tantamount to market manipulation.

All very depressing.

[holts] 09/3/2018 16:46

There are myriads of detail in the prospectus , obvious eeven to the untrained eye , how then can 'Professionals' be allowed to get away with making such statements without outlining all the possibilities .

[spectoacc] 09/3/2018 16:20

@Wirral - since the decision hasn't been made yet, & no doubt they'd pick a later 6 months, at what price would GACA settle I wonder? Knowing you'll only receive the average.

[wirralowl] 09/3/2018 16:18

Thanks davebowler.

“On a return of assets on a liquidation or reduction of capital of the Company, the
holders of the Existing Preference Shares are entitled, in priority to any payment on
any other class of shares, to payment of the greater of (i) £ l per Existing Preference
Share and (ii) a sum per Existing Preference Share equal to the average of the means of
the daily quotations (as certified by the auditor of the Company) at which the Existing
Preference Shares have been quoted on the London Stock Exchange during the six
months immediately preceding the relevant date after deducting from each daily mean
any arrears or accruals of dividends, together with, in each case, a sum equal to any
arrears or deficiency of the fixed dividend to be calculated down to the date of the
return of capital, but are not entitled to any further participation in assets”


Looking at the average price of the last 6 months, would give a redemption price in the region of 165p. Would quite happily settle for that now.

As you say, it could've just been a very underhand way to affect the market and allow cheap buybacks for them in the meantime.

[davebowler] 09/3/2018 15:43

Mark (Taber )?has posted a link to the prospectus on Twitter, I suggest everyone download a copy and read page 41. Aviva have (deliberately) left out vital information in the press release.

“On a return of assets on a liquidation or reduction of capital of the Company, the
holders of the Existing Preference Shares are entitled, in priority to any payment on
any other class of shares, to payment of the greater of (i) £ l per Existing Preference
Share and (ii) a sum per Existing Preference Share equal to the average of the means of
the daily quotations (as certified by the auditor of the Company) at which the Existing
Preference Shares have been quoted on the London Stock Exchange during the six
months immediately preceding the relevant date after deducting from each daily mean
any arrears or accruals of dividends, together with, in each case, a sum equal to any
arrears or deficiency of the fixed dividend to be calculated down to the date of the
return of capital, but are not entitled to any further participation in assets”

It looks to me that Aviva are trying to push down the price of the Prefs on the LSE so they can buy them back cheaper. If no one was selling they would have to pay full price for them.

[holts] 09/3/2018 15:35

So far trading the differentials between llpc and llpd has been profitable thanks to this Aviva smash and grab , whether in the long term just selling out would have been the best bet remains to be seen but it's given a 9.7% uplift in yield and a paper gain into the bargain. Still this is lloyds so any odd behaviour could well be expected .

[jonwig] 09/3/2018 14:28

@ hpcg - the thing is the permanent coupon and the legals, weighed against odds of losing it. A lot of investors (not me) bought Greek and Bank of Ireland bonds in the GFC. Profitably.

Some comment about "average price over ..." across these boards suggests that Aviva haven't been altogether straight here! (Haven't had time to look more, but I hope they are true.)

[spectoacc] 09/3/2018 14:25

I guess there's the "should get most of your money back in a worst-case scenario" argument. But agree that the gains aren't too great either.

Saying that - been very happily in & out of GACA today. Amazes me how low people sell, on the whiff of bad news. 102 the lowest sell I saw (whilst bid was 117p) but some decent size sells at 103.5p - 22,300. 29,800, 38k at 104p. Utterly pointless selling there I'd have thought.

[hpcg] 09/3/2018 14:18

jonwig - I accept that whatever happens will take some time, but surely fixed income investing, apart from distressed issues, is all about security first and foremost? Why risk a small loss for a small gain when one can use the equity market to risk a small loss for a large gain?

[pollen8] 09/3/2018 10:59

Holts- Indeed. Trust? I am beginning to forget the meaning of the word.

[holts] 09/3/2018 10:53

I wonder if any of Avivas funds held any of their own instruments , if possible I then wonder if they had been traded before hand ,very conspiritorial I know ,but who can you trust ?

[jonwig] 09/3/2018 10:35

hpcg - the company needs not only a combined vote, but court sanction. It could well be the latter which drags on if there are objections. Then your risk would be lowered by the dividends paid.

[hpcg] 09/3/2018 10:22

I'm not sure I can think of a way of profiting from this unless the price drops to near par? Sure, Aviva could start to buy back now at 110 (or whatever the current price is) but if they set that as the bar then that will be the floor and the at best principal recovery, so secondary market prices will tend to that also. Sure the interest rate gets attractive, but a par redemption negates that unless one can get a couple of years out of it at least. There seems to be a bid between 110 and 120, but I struggle to see the upside unless one is confident that the company cannot return surplus capital. All in all it seems a lot of hard work for almost no gain, excepting being able to buy at 1.05 or below.