Gen.acc.8se.pf Discussion Threads

[bisiboy] 16/3/2018 09:06

well done Coleridge a very good letter

[joe say] 16/3/2018 08:03

Utterly disgraceful

and btw the Conmpanies Act 2006 imposes a duty on directors to act in the best interests of ALL stakeholders, to act independently and to promote the success of the company

One could argue that they've failed here - on all these counts

[horndean eagle] 16/3/2018 07:55

Perhaps the decent thing to do is let them run to 2026 and then call them. You can at least then argue they have no regulatory capital value and preference share holders have been warned. I think they come out with a reasonable tender and buy pref holders out with the threat of a call otherwise a la LLoyds ECN.

[spectoacc] 16/3/2018 07:42

Having slept on it:

1. Why's that statement taken a week

2. Why isn't it RNS'd

3. Aviva seem fairly determined to do "something" with their prefs, at least by 2026 when they cease to count as regulatory capital

4. They've trashed - and continue to trash - both their own reputation and also the entire prefs sector, by continuing to claim that irredeemable doesn't mean "can't be forcibly cancelled/retired". (Love the introduction of the word "retired").

5. References to still not having decided, and to balancing ord/pref shareholders, suggest an offer above par to me, but presumably not for a while to avoid talk of market manipulation (good luck with that).

[rik shaw] 15/3/2018 22:50

Telegraph Article:

[coleridge4] 15/3/2018 19:03

And a copy of my email to Aviva itself forwarding my email to the FCA:

FAO CHRIS ESSON, INVESTOR RELATIONS AT AVIVA

Dear Mr Esson

I attach a copy of an email which I have today sent to the Financial Conduct Authority. I have asked them to investigate the manner in which Aviva plc announced on 8 March 2018 a possible capital reduction affecting 4 classes of preference share, issed by members of your group of companies. I held material investments in 3 of these classes at the time.

The manner of the announcement had a significant and immediate impact on the market value of preference shares issued by your group of companies, and therefore on the value of my own holdings. In addition, the manner of the announcement has caused consequential losses elsewhere.

I would be grateful if you could consider the comments made and let me have your thoughts on the matter. Please forward my email on to the appropriate person in your organisation if these matters are better dealt with by someone else.

You will see that I have 3 principal concerns:

1. Aviva is, I believe, the sole ordinary shareholder in General Accident, the issuer of 2 of the classes of preference share. The announcement made on 8 March caused an immediate transfer of value out of the hands of preference shareholders into the hands of Aviva itself. Given that it was Aviva itself that made this announcement it is clear that the ordinary shareholder was informed of this proposal before the preference shareholders. I want this looked at and I expect to be fully compensated for the loss your announcement caused. As I note in my email to the FCA, it is irrelevant whether the capital reduction now takes place or not. The fact is, it is the announcement itself that destroyed value in the General Accident shares.
2. The preference shareholders are real investors who expect to receive communications from the company on matters which are pertinent to them. No such communication appears to have been provided merely a few sentences buried in a much longer general report on the companies’ affairs, apparently targeted at ordinary shareholders. Has the company forgotten the preference shareholders are a completely separate group?
3. Aviva and General Accident have benefited from fixed rate, non-repayable finance for over 25 years. A number of other similar organisations with reasonable covenants have been able to raise finance in a similar way, creating a small, but stable market in irredeemable preference shares to the benefit of the UK stock market. Aviva’s announcement created immediate instability in that market, causing consequential losses. I believe it is important that the FCA takes appropriate action to restore confidence in that market and that consequential losses are fully compensated by Aviva.

I would be grateful if you could acknowledge receipt and give me some indication of the timescale in which I might expect to receive a full response.

Yours sincerely

[coleridge4] 15/3/2018 19:00

Sorry this is a long one ............. a copy of an email I have sent to the FCA to look into this. Particularly worrying that General Accident is a subsidiary of Aviva so that the entity which benefits from taking out the prefs is Aviva itself:

TO THE FCA:


Dear Sirs

I would be grateful if you could investigate recent instability in the market for irredeemable preference shares issued by Aviva plc and its subsidiary General Accident plc. These are listed under the symbols LSE: AV.A, AV.B, GACA and GACB. The instability has now spread more widely to other companies with preference shares in issue.

The Aviva and General Accident preference shares were issued in the early 1990’s and have throughout been marketed as irredeemable. As an irredeemable share carrying a fixed coupon the value of the shares in the open market has tended to vary according to market perception of future interest rates and credit-worthiness of the issuer. At close of business on 7 March 2018 all of these shares had a market value well in excess of their par value (as much as 50% above par, typically) , reflecting the headline coupon payable of between 7%-9%. This was a fairly standard coupon at the time of issue. The market price accorded to such shares varies over time but is very different from that accorded to a redeemable preference share, such as that of Balfour Beatty (LSE:BBYB), which currently stands at just 10%, notwithstanding that its dividend accrues as 10.75%p.a. Clearly investors take very seriously the fundamental distinction between a redeemable and an irredeemable share, heavily discounting a shares whose redemption is imminent.

As you may already be aware, on 8 March 2018 Aviva announced its annual results and, tucked away in the announcement, mentioned that it was seriously considering asking its shareholders to vote to approve a capital reduction programme which would see the “irredeemable” preference shares cancelled with compensation to be made at par. No advance notice of this key market-sensitive information was made available to preference shareholders as a group before this announcement. Apparently, at a later conference for financial analysts it was explained that it was not just the preference shareholders who would be able to vote on this matter, but the much larger group of ordinary shareholders as well (which sounds like a form of oppression of minority shareholders). This action falls well below the standards of communication that I would expect in respect of a listed share. Inevitably, the market value of the preference shares plummeted as it became clear just what the implications were – effectively, a transfer of value accrued over many years by preference shareholders into the hands of the companies’ ordinary shareholders (which in the case of General Accident implies Aviva itself!)

The issue has also had wider implications for the general market in listed preference shares, particularly those issued by RSA (LSE:RSAB). As a result of the announcement I have taken the view that the UK market in preference shares has become so unstable that I can no longer risk capital in it. I have now sold my holdings in all the shares mentioned. I estimate the cost of Aviva’s announcement last week to be around £XXX to me personally.

If Aviva’s approach is allowed to stand investors may reasonably ask themselves why they should ever invest in an irredeemable preference share issued in the future.

I would be grateful if the FCA could make enquiries into the behaviour of Aviva’s management in announcing its proposals in this way. I believe the following key matters arise:

1. I understand that General Accident plc is a wholly-owned subsidiary of Aviva plc. The announcement made by the management of Aviva plc seemed likely from the outset to cause value to be transferred from shareholders holding listed General Accident preference shares (I.e the general public) into ordinary shares held by Aviva plc itself. As it was the management of Aviva which made the announcement I cannot see how there can be any credibility that the interests of preference shareholders could ever be protected. It appears that the management of Aviva have put themselves into a position where they can decide to increase the value of Aviva at the expense of outside stakeholders. It is my view that Aviva should be required to make a payment to those who held preference shares in General Accident at close of business on 7 March 2018 equal to the difference between the market value of those shares on that date and the eventual sale price achieved (or achievable, if the shares are still held). As it was the announcement itself which destroyed value in the preference shares it is irrelevant whether Aviva subsequently decides to undertake a capital reduction or not. Certainly, I would strongly argue that those to whom recompense should be paid are the shareholders who held the shares at the time of the announcement on 8 March 2018, not current holders (where different).
2. The preference shares in Aviva itself are slightly different, in that the legal person who benefits from the destruction of the value of preference shares is not Aviva itself (i.e the entity making the announcement), rather it is the ordinary shareholders in Aviva. In other words value is transferred from one group of investors to another. Given the obvious very material impact on the preference shareholders as a body I am completely at a loss why the management of Aviva plc felt it sufficient to bury such news in a long statement focussing largely on the interests of ordinary shareholders. Management seem to have overlooked completely the interests of preference shareholders, a completely separate group. Obviously, these comments would also apply to the General Accident preference shares.
3. Thirdly, management actions have undermined the investment proposition not only in the preference shares in the company and its subsidiary, but also in other insurers, such as RSA plc. If points 1 and 2 above are accepted then I believe it follows that preference shareholders in RSA shares (RSAB), and possibly other issuers, should also be compensated for actual and potential losses sustained in the couple of days subsequent to Aviva’s announcement.

When companies list irredeemable preference shares, I believe they do so because they are able to obtain a cheaper form of finance than issuing a redeemable share, since shareholders know that their return will be paid indefinitely. Further, the issuer has the certainty that its costs of finance will not vary even if interest rates increase and that it can never be asked to repay the funds. Aviva and General Accident have had the benefit of the proceeds from the issue of these shares for over 25 years, something which has enabled the companies to grow. It is not acceptable, and indeed prejudicial to the whole market in listed irredeemable securities, if a company is permitted to unilaterally decide to redeem such shares at par value, rather than market value. Yes, companies must be allowed to change their capital over time but it must never be at the expense of other stakeholders or at the expense of the reputation of the wider UK listed market in such securities. Further, where announcements are made which are likely to affect the interests of a particular body of shareholders every effort should be made to alert them as a group, not burying key market sensitive information in documents largely serving another purpose.

I am aware that you are not usually able to make a statement about the outcome of your enquiries. In view however of the widespread implications of this matter for investors, the damage inflicted on the UK preference share market and the level of losses inflicted on many smaller shareholders, I do believe that this is one case where a public censure is appropriate. Such censure will be picked up by the financial press enabling the UK market in such shares to recover and should assist shareholders to obtain full recompense from Aviva.

I will make Aviva aware that I have raised all of the above with you.

I would be grateful for your confirmation of receipt.

Yours faithfully

[laurence14] 15/3/2018 17:56

A bit of back - peddling?

[laurence14] 15/3/2018 17:53

From the Aviva corporate website :https://www.aviva.com/investors/credit-investors/#credit-statementStatement regarding our preference shares – updated 15 March 2018 In the announcement of Aviva plc's ("Aviva" or "we") 2017 full year results on 8 March 2018 we signalled our intention to reduce hybrid debt by £900 million and that we were targeting more than £500 million in additional capital returns, incorporating liability management and returns to shareholders, and that we were considering our alternatives for doing so. We noted in this regard that we have the ability to cancel the Aviva and GA plc ("GA") preference shares at par value (plus accrued interest, arrears and in the case of GA plc, issue premium). GA made a similar announcement on the same day. We have received a number of questions regarding the reference made in the announcements to the ability to cancel the preference shares issued by Aviva and GA through a court approved reduction of capital, subject to the approval of the relevant issuer's ordinary and preference shareholders voting together. In response to these queries we are providing investors with a more detailed explanation of the mechanism through which the preference shares may, with Court and shareholder approval, be cancelled following a reduction of capital. This is one of a number of methods by which preference shares such as these can be retired. Neither this document nor the additional information provided should be taken as a statement of the Company's intent either with respect to any decision to return capital on the preference shares, the mechanism of cancellation or the amount per preference share to be returned, and no inference of such intention should be made. No decision has yet been taken. If and when a decision is taken, we will make the appropriate market announcements. As noted in our announcement on the 8 March 2018 we and GA are evaluating the available alternatives, including how to balance the interests of ordinary and preferred shareholders. Preference shareholders should consult their broker or financial adviser on what steps, if any, they should take as a result of this document. If you require any help or further information regarding your shareholding, please contact Aviva's Registrar, Computershare Investor Services PLC

[laurence14] 15/3/2018 17:39

You only have to look at the address : Enquiries:Roy Tooley, Head of Secretariat - Corporate [phone]Aviva plcSt Helen's, 1 UndershaftLondon EC3P 3DQTo understand why We've been shafted!

[davebowler] 12/3/2018 09:41

I'm glad they are taking a 'holier than thou' approach!!!!

[speedsgh] 12/3/2018 09:39

Courtesy of SpectoAcc on the FIX thread...



SpectoAcc - 12 Mar '18 - 09:14 - 5479 of 5481

Interesting statement - not so much for Ecclesiastical's own intentions, but for what they say about Aviva:

" 12(th) March 2018
Announcement by Ecclesiastical Insurance Office plc
Ecclesiastical Insurance Office plc ("Ecclesiastical") notes the recent movement in the price of its 8.625% preference shares. Ecclesiastical assumes this is a result of Aviva's announcement on 8(th) March, in which Aviva stated that it has "the ability to cancel [Aviva's and General Accident's] preference shares at par value through a reduction of capital, subject to shareholder vote and court approval".
Ecclesiastical notes Aviva's governance statement that "as one of the biggest companies in our sector, we aim to make our industry work better for everyone. That starts with us building trust with our customers, investors and shareholders by running our business honestly and transparently." Ecclesiastical trusts that Aviva will follow the principles set out in that statement when considering whether to pursue this course of action.
Ecclesiastical has holdings in Aviva and General Accident's preference shares, but these are not material in size in the context of Aviva's announcement and Ecclesiastical's balance sheet strength.
Ecclesiastical has no plans to cancel its own 8.625% preference shares at par value through a reduction of capital."

[bisiboy] 11/3/2018 23:07

Spectoacc I agree with what you say It certainly looks that way but if so it is extremely sad and the board have made a misjudgement at the least.
On principal regardless of what they might legally be able to achieve any reasonable person would assume that their coupon would be safe and would be irredeamable and that
The winding up/cancellation would only be on the grounds of the institutions financial weakness clearly not the case hear
The board should look beyond some oik in the finance department coming up with this
Money saving idea no doubt looked at by lawyers and should think of the following
The preference holders are also shareholders whom the board serves
The cost is small and not threatening to the business only impact is that without these in issue perhaps ordinary dividend might be a little higher but board has lost more than the cost of these through other mis adventures
Many of the holders here are people who bought in good faith with reasonable expectations of being treated fairly many of whom are pensioners
They should not be playing games and if they were intending to use the 6 months average price for cancellation it should be based on the 6 months prior to the statement being made rather than deliberately driving the price down by causing uncertainty
If the later is a deliberate tactic they should be ashamed

[kenny] 11/3/2018 22:43

thuja2, I agree and below is a comment I posted earlier today on another BB.

Unfortunately, the longer this goes on, the more that investors will take the view that they should sell. It is well known that investors hate uncertainty so lots will, over time, bail out. I think the company knows this, so know that it is not in their interests to come to a speedy "decision".

From the company's point of view, it is to their advantage to keep the uncertainty present for as long as possible so that the price of the various preference classes keeps gradually drifting downwards. It could easily take 6 to 12 months before the company announces their decision e.g. the next two half yearly results announcements.

I don't know of any way that shareholders can put pressure on the company to announce a decision speedily - a decision they may have already made. The company will just insist that they are still "evaluating their options" and have not yet come to a decision. Unfortunately, one cannot really argue with that because as prices move, their options change.

Therefore, I wonder if a campaign of mail expressing dissatisfaction will be effective. It might be better aimed at pressing the company to make a quick decision albeit the Lloyds experience seems to suggest that any campaign may prove fruitless.

P.S. To address one other comment that suggests the company will buy in the market. I just cannot see how the company benefits from buying in the market at any time, when it is time itself that will be working to its advantage. Even if prices move below par, it may not be to their advantage because otherwise their presentation to a judge could not make a statement to the following effect: the share price is below par and we are offering par, so we are not harming any holder.

[thuja2] 11/3/2018 20:23

Perhaps they are hoping everyone will sell early saving them the trouble of buying at par, which seems to be happening, there must be a number of institutions who hold this share who will not be happy to have the capital reduced.

[my retirement fund] 11/3/2018 18:45

Sky, yea whatever.

[kenny] 11/3/2018 17:10

Skyship - I am not holding my breath for a fall in the RUSP share price. I would actually welcome the chance to add more cheaply.

You have perhaps forgotten some history. When in late 2012/early 2013 I recommended that people look at RECI, you stated you would never invest in a loan company with such a dubious history. Some three and a half years later you appeared as a holder of RECI and, after some further time, posted that RECI had now become your largest holding.

Some months after you had made RECI your largest holding, I confirmed on the RECI board that I had sold the last of my RECI because, for various reasons stated on that board, I did not see the price improving much in the future. Indeed, to date, it has not.

It is a shame that you did not have an open mind in late 2012/early 2013 about RECI, because in the subsequent three and a half years, a combination of share price appreciation and dividends meant shareholders doubled their money.

You are welcome to repeat your past history - wait a few years until RUSP is fully valued and then invest. However, please do not rubbish an investment without, again, first researching it and reading the bulletin board for that preference share. As investors, we should all have the aim of constantly learning something new - otherwise we are condemned to keep repeating our mistakes.

[skyship] 11/3/2018 15:05

MRF - mentioned here and on one other thread where someone said they owned RUSP. No, not looking to buy. Wouldn't buy anything associated with Putin's kleptocracy.

My comment was an entirely altruistic view that some anti-Russian sentiment over the Sergei Skripal affair might well have a negative effect on RUSP.

We'll see...perhaps you should sell tomorrow and thank me in one month's time!

[my retirement fund] 11/3/2018 14:12

Being Ilogical Sky ? It would of cause be illogical to be posting some such across a number of bullitin boards, as you have just done given you dont have any. Unless of course you were interested in them !

[my retirement fund] 11/3/2018 14:09

I guess roughly translated Skyship what your saying is that given the bullet proof terms these were issued and that they were not sold of like many of the other Prefs that your still hoping to be picking some of them up cheap as well and it would be great if a few others could kindly sell and weaken these also.

[skyship] 11/3/2018 14:01

par55 - re yr 219 above - RE: RUSP. Not a holder; but certainly if I were I would be a seller, purely on the possibility of a souring of relationships with Russia over the Sergei Skripal poisoning.

May be totally illogical; but Markets are driven by sentiment and with the possibility of brickbats being thrown on both sides, perhaps better to step aside pro tem.

[davebowler] 11/3/2018 12:07

This might be a useful stick to beat Aviva with-

[my retirement fund] 11/3/2018 09:59

I think its clear Aviva have made this open statement to guage what resistance they are likely to face so as to select the least damaging but cheapest option for them.At this stage I would encourage every interested party to write to their investor relations department and complain in the most frank and robust manner they possible can.That also applies to holders of other preference share as well since the longer this situation continues the mire damaging it becomes to all income investors.