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Aviva and General Accident preference shares

Gilts, bonds, and interest-bearing shares
johnhemming
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Re: Aviva and General Accident preference shares

#124422

Postby johnhemming » March 13th, 2018, 7:03 am

Again looking at the GACA prospectus

It clearly states that the preference shares are irredeemable.

Hence redeeming them through a return of capital is contrary to the rights of the preference shares and would require a class vote. Similarly the shares have been described in the short description as being irredeemable.

Schedule 10A of FSMA 2000 states:
https://www.legislation.gov.uk/ukpga/20 ... hedule/10A
the law wrote:PART 2
LIABILITY IN CONNECTION WITH PUBLISHED INFORMATION
Liability of issuer for misleading statement or dishonest omission
3(1)An issuer of securities to which this Schedule applies is liable to pay compensation to a person who—
(a)acquires, continues to hold or disposes of the securities in reliance on published information to which this Schedule applies, and
(b)suffers loss in respect of the securities as a result of—
(i)any untrue or misleading statement in that published information, or
(ii)the omission from that published information of any matter required to be included in it.
(2)The issuer is liable in respect of an untrue or misleading statement only if a person discharging managerial responsibilities within the issuer knew the statement to be untrue or misleading or was reckless as to whether it was untrue or misleading.
(3)The issuer is liable in respect of the omission of any matter required to be included in published information only if a person discharging managerial responsibilities within the issuer knew the omission to be a dishonest concealment of a material fact.
(4)A loss is not regarded as suffered as a result of the statement or omission unless the person suffering it acquired, continued to hold or disposed of the relevant securities—
(a)in reliance on the information in question, and
(b)at a time when, and in circumstances in which, it was reasonable for him to rely on it.
4An issuer of securities to which this Schedule applies is not liable under paragraph 3 to pay compensation to a person for loss suffered as a result of an untrue or misleading statement in, or omission from, published information to which this Schedule applies if—
(a)the published information is contained in listing particulars or a prospectus (or supplementary listing particulars or a supplementary prospectus), and

(b)the issuer is liable under section 90 (compensation for statements in listing particulars or prospectus) to pay compensation to the person in respect of the statement or omission.


Which puts the company in a difficult position. If they advertise the investments are irredeemable and find a loophole through which they can be redeemed at par then they can be liable under FSMA.

taylor20
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Re: Aviva and General Accident preference shares

#124430

Postby taylor20 » March 13th, 2018, 7:40 am

I assume there is no other capital that ranks ahead of the prefs. i.e. That has the 'right' to be paid in advance of any capital return to the preference holders?

From the name one might assume that preference shares rank first, but...

GoSeigen
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Re: Aviva and General Accident preference shares

#124437

Postby GoSeigen » March 13th, 2018, 8:06 am

johnhemming wrote:Again looking at the GACA prospectus

It clearly states that the preference shares are irredeemable.


Good. That's because they are. This ground has been covered already, John. Please feel free to refute my earlier points about the meaning of "irredeemable".



As for me I am done on this thread and these boards for a while. The atmosphere has become partisan with little listening going on now. Addressing further the unfounded claims being made is likely simply to annoy, since I have said everything I can about it already.


Thank you all for tolerating my ramblings. Best of luck to holders AND those who continue to finance their 8.75% coupons as this story unfolds. Hopefully a mutually acceptable accommodation will be reached.


GS

Alaric
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Re: Aviva and General Accident preference shares

#124443

Postby Alaric » March 13th, 2018, 8:38 am

GoSeigen wrote:Best of luck to holders AND those who continue to finance their 8.75% coupons as this story unfolds. Hopefully a mutually acceptable accommodation will be reached.


It is and always has been simple. Aviva have to make an offer which reflects the value of a perpetual income of 8.75 per 100 nominal. If they make an offer or a demand which wouldn't be acceptable to a majority of the Preference holders, they shouldn't be attempting to avoid the need for such a vote, an action which may be illegal under EU law anyway.

johnhemming
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Re: Aviva and General Accident preference shares

#124469

Postby johnhemming » March 13th, 2018, 9:37 am

GoSeigen wrote:
johnhemming wrote:Again looking at the GACA prospectus

It clearly states that the preference shares are irredeemable.


Good. That's because they are. This ground has been covered already, John. Please feel free to refute my earlier points about the meaning of "irredeemable".


Ignoring the European Law and the FSMA issue and anything else, I think it appears that there are three types of preference shares. There are those that are explicitly redeemable and defined as redeemable shares. Then there are those that are the permanents or irredeemable. Those cannot be redeemed without a class vote. Then there are a third type that are not explicitly redeemable, but are not permanents and can be redeemed by going through the process of a class vote. A simple general meeting vote suffices (ignoring the Second Directive of the EU).

It is explicit in some of the AV prefs that the shares cannot be made redeemable without consent from the class and implicit in the description of the GA shares. However, to change the GA prefs to allow redemption would require a class vote and redeeming them without that is a variation of their rights (whether or not abrogation includes cancellation).

The question then is how one determines which sort of preference share you are dealing with.

I have had a look at the cases looking at this issue and not seen one that deals with the question as to the situation where there is a capital reduction proposed for shares which are stated to be irredeemable.

Clearly any capital reduction that resulted in a payment for the shares would be a redemption of those shares. That, of course, would be caught by the requirement for a class vote. A capital reduction that does not result in the shares being redeemed would not require a class vote.

AleisterCrowley
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Re: Aviva and General Accident preference shares

#124474

Postby AleisterCrowley » March 13th, 2018, 9:43 am

GoSeigen wrote:
AleisterCrowley wrote:All very interesting so far -
A question - if all pref shares can be called at par at the whim of the issuer (subject to vote across all share classes) what differentiates redeemable from irredeemable prefs? I think a previous poster touched on this but can't find the post.



Yes, I posted about this a while back. Briefly: in the CA2006 "redeemable shares" are those that have language about their redemption rights when created and the redemption process is policed by a set of rules in the Act. The company may redeem according to the terms without further recourse to the shareholders but failure to heed the procedure in the Act is a criminal offence. "Irredeemable" shares do not have this language, or more usually are specified as being "irredeemable". This does not mean they cannot be repaid, but repayment by capital reduction for example requires the express authorisation of a special resolution and approval of the High Court.

So your supposition that all prefs can be called "at the whim of the issuer" is not correct. Alaric dreamed that one up I believe. There are rules and hurdles. [as touched on in post - vote across all share classes]

According to the law prefs may be repaid in a capital reduction. This is done (maybe at par) if this is approved by the requisite shareholder vote(s) and if the other statutory and contractual terms allow it and are followed. The procedure can be tightened or relaxed relative to the statutory default by the terms of the prefs [putting it simply]. Most pref terms do allow recall at par; why wouldn't they? [having looked at the AV.A Final terms it doesn't exactly jump out at one]

In practical terms though few prefs would be considered in danger of early recall at par. First, it is seldom economically viable to do so (price below par, no spare capital and many other reasons). Second, the terms may make it difficult or impossible procedurally. Third business, regulatory or other reasons might deter the company or shareholders from reducing capital. So most of the time it is perfectly reasonable to consider prefs as perpetual or requiring repayment around market value or better to induce holders to give them up.

'''

GS

Thanks GS
The market reaction suggests that holders of the irredeemables (perpetuals) didn't factor this possibility in to the pricing of the shares.
This includes institutional investors/fund managers who would be expected to be aware of this potential call at par
Mr Taber tweeted something along these lines -"Have spoken to a load of professional FI investors today they all swear yesterday was the first they heard anything from @Aviva about ability to cancel their prefs without a class vote."

BobGe
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Re: Aviva and General Accident preference shares

#124491

Postby BobGe » March 13th, 2018, 10:31 am

ayshfm1 wrote:However I hold my shares in nominee form with the Halifax, which as things stand means I can't vote.

FWIW, incorrect. Just ask to be put on the register. See P24.
https://static.halifax.co.uk/assets/pdf ... ochure.pdf

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Re: Aviva and General Accident preference shares

#124497

Postby BobGe » March 13th, 2018, 10:50 am

johnhemming wrote:Schedule 10A of FSMA 2000 states: etc., etc.
Which puts the company in a difficult position. If they advertise the investments are irredeemable and find a loophole through which they can be redeemed at par then they can be liable under FSMA.

Why am I reminded of LBG and the ECNs... :?

AleisterCrowley
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Re: Aviva and General Accident preference shares

#124505

Postby AleisterCrowley » March 13th, 2018, 11:16 am

BobGe wrote:
ayshfm1 wrote:However I hold my shares in nominee form with the Halifax, which as things stand means I can't vote.

FWIW, incorrect. Just ask to be put on the register. See P24.
https://static.halifax.co.uk/assets/pdf ... ochure.pdf

I will investigate, as I hold AV prefs and ords with HSDL
Assume I'll have voting rights for both classes?

ayshfm1
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Re: Aviva and General Accident preference shares

#124525

Postby ayshfm1 » March 13th, 2018, 12:13 pm

You would. I seem to recall the prefs have more weight. I think I have to call HFX to get those options set, doesn't seem to be anyway to get them done online. My wife also hold ords (she has no clue that she does....) not looking forward to getting her to ring up

AleisterCrowley
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Re: Aviva and General Accident preference shares

#124528

Postby AleisterCrowley » March 13th, 2018, 12:18 pm

I might try their online chat facility (when work stop bothering me with daft questions!)

swill453
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Re: Aviva and General Accident preference shares

#124553

Postby swill453 » March 13th, 2018, 1:56 pm

FYI, AJ Bell Youinvest says
How do I attend and/or vote at an AGM or EGM?
You can ask for the right to vote or attend an AGM via a secure message, but please give us at least 5 working days’ notice to action your request. For an EGM, you will be able to tells us your instructions online and we will send you a secure message with details of the vote.

So in theory one can sit back and wait. But I think if and when the EGM is announced I will contact them to check.

Scott.

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Re: Aviva and General Accident preference shares

#124569

Postby Wozzitworthit » March 13th, 2018, 4:03 pm

I emailed Standard Chartered for any details on their two Preference Shares STAB and STAC and got this reply back very quickly:

You can find them listed on our website

https://www.sc.com/en/investors/credit-ratings-fixed-income/capital-securities-in-issue/#tier1

(Comment from me – Click on Tier 1 tab if it doesn’t go there straightaway)

For related queries for preference shares, please contact the Fixed income team

https://www.sc.com/en/investors/#fixedincome

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Re: Aviva and General Accident preference shares

#124578

Postby paulmiller » March 13th, 2018, 4:27 pm

Does anyone know if Aviva are allowed to make an offer to exchange the Preference shares for ordinary shares? Both the Preference shares and the ordinary shares were yielding about 5% before Aviva dropped their bombshell, so assuming a 175 price for GACA, if Aviva were to offer say 1 ordinary share for every 3 Preference shares then it could probably be done in a fair way that would be acceptable to most Preference share holders. It would also presumably allow Aviva to preserve their cash and to also increase their capital.

Alaric
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Re: Aviva and General Accident preference shares

#124593

Postby Alaric » March 13th, 2018, 5:30 pm

paulmiller wrote:Does anyone know if Aviva are allowed to make an offer to exchange the Preference shares for ordinary shares?


Under a capital reconstruction they can do most things. They would need shareholder and High Court approval in all probability.

The key problem is that they assert they can carry out a capital reconstruction without paying fair value for the income they would like the Preference shareholders to give up.

An exchange for ordinary would enable preference holders to exit by selling the new ordinaries. Ordinary shareholders might not approve given the dilution in their value of ownership of the company.

Wizard
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Re: Aviva and General Accident preference shares

#124595

Postby Wizard » March 13th, 2018, 5:33 pm

paulmiller wrote:Does anyone know if Aviva are allowed to make an offer to exchange the Preference shares for ordinary shares? Both the Preference shares and the ordinary shares were yielding about 5% before Aviva dropped their bombshell, so assuming a 175 price for GACA, if Aviva were to offer say 1 ordinary share for every 3 Preference shares then it could probably be done in a fair way that would be acceptable to most Preference share holders. It would also presumably allow Aviva to preserve their cash and to also increase their capital.

Except they can cut or cancel the dividend on the ordinary shares whenever they want. I bought the prefs for a reason. Also, would such an exchange count as a taxable event? Better than losing them at par, but not ideal to be honest.

swill453
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Re: Aviva and General Accident preference shares

#124597

Postby swill453 » March 13th, 2018, 5:48 pm

On his fixedincomeinvestments forum, OldBoyReturns has posted the following:
While I am still formulating strategy and establishing key contacts I have created an online form so that I can collect email addresses for campaign emails and also to get an idea of holdings at:

https://docs.google.com/forms/d/14ubyGO ... sp=sharing

Please complete and share it around the various forums etc. where the situation is being discussed.

Many thanks.

https://www.fixedincomeinvestments.co.u ... #post-2034

Scott.

Alaric
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Re: Aviva and General Accident preference shares

#124598

Postby Alaric » March 13th, 2018, 5:51 pm

Wizard wrote: Also, would such an exchange count as a taxable event?


HMRC usually seem open to the argument that the share ownership is carried forward when one share class is substituted for another, so the CGT event is only triggered on final disposal.

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Re: Aviva and General Accident preference shares

#124601

Postby OwenSwansea » March 13th, 2018, 6:06 pm

Richard Evans of the Daily Telegraph will be dealing with this subject in his Questor column on Friday.

swill453
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Re: Aviva and General Accident preference shares

#124693

Postby swill453 » March 14th, 2018, 8:22 am



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