The Lemon Fool

Aviva plc and General Accident plc preference shares

Announcement of Goodwill Payment

Today Aviva plc ("Aviva" or "the Company") and General Accident plc are announcing that they will offer a discretionary goodwill payment to shareholders who sold preference shares* in the period from 8 to 22 March 2018 (inclusive).

https://www.investegate.co.uk/aviva-plc ... 00144778M/

This is the correct link to the Aviva website from investigate (it is case sensitive)
https://www.aviva.com/investors/Preference-shares/

I don't think we will see any other company trying this ploy.

I read this as only applying to people who sold shares they hold for themselves and not institutional holders.

johnhemming wrote:
I don't think we will see any other company trying this ploy.

Maybe not that particular 'ploy' as you call it but it does look as though there is an industry wide problem in that if these expensive Prefs no longer are to count as regulatory capital, something will give, probably repayment at current M V.

Dod

It will be interesting to see to what extent anyone tries anything compulsorily rather than going for a class vote. I am not sure they will.

Hmmm.

Probably fair to say Aviva are paying for having messed up.

But there was collateral damage: prefs of other companies got hit too. Opens an interesting argument for anyone who sold those.

Dod101 wrote:if these expensive Prefs no longer are to count as regulatory capital, something will give, probably repayment at current M V.

Are they that expensive? They're functioning a lot like a bond, and trading at similar prices. Would Aviva (or AN Other) hypothetically be able, for example, to convert compulsorily to Ordinary shares on an equivalent-market-value basis, and if so, how would *that* affect their cost?

UncleEbenezer wrote: Would Aviva (or AN Other) hypothetically be able, for example, to convert compulsorily to Ordinary shares on an equivalent-market-value basis, and if so, how would *that* affect their cost?

Part of the controversy was as to whether Ordinary shareholders in Aviva would be able to out vote Preference shareholders. Doing anything compulsory to Prefs that isn't in their financial interest is likely to require this. Anything at market price is less likely to be opposed, it was attempting to short change Pref holders by offering 100 for their bond-like asset worth 160 as income that was the problem.

How Aviva and others would deal with phasing out of Prefs remains to be seen. If they still need them as fixed interest capital, a conversion offer would seem on the cards. If they don't, a straight tender for cash or a market value conversion to equity could be possible. In some other Companies, there's a conversion built in as part of the terms.

Alaric wrote:[How Aviva and others would deal with phasing out of Prefs remains to be seen. If they still need them as fixed interest capital, a conversion offer would seem on the cards. If they don't, a straight tender for cash or a market value conversion to equity could be possible. In some other Companies, there's a conversion built in as part of the terms.

An offer to convert would be one option I suppose but it would need to be accompanied by a cash offer as an alternative. I think it would be a lot easier for Aviva and others simply to offer a buy out in the same way that ITs have often done with expensive Debentures. Everything has its price although of course it might be difficult to enforce a compulsory buy out.

Dod

There was a time when buying into a HYP at below or near par prices was an attractive prospect, but not now.

I replaced my AV.A with (higher yielding, at the time) LGEN last December; that said would happily do a u-turn were those prices to tank again.

But prefs are Verboten, no?

It's interesting to see how the price has stalled at around £1.50. Bearing in mind that there is now no realistic prospect of a redemption / reduction of capital paying only par value one would have expected the price to return to where it was before the announcement, namely about £1.69.

Any ideas why this hasn't happened, and any thoughts as to whether it might / might not do so in the future?