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Aviva and General Accident preference shares

Gilts, bonds, and interest-bearing shares
thebarns
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Aviva and General Accident preference shares

#123176

Postby thebarns » March 8th, 2018, 2:07 pm

I see these preference shares have just tanked !!!!!

Anyone know why, must be company specific as Aviva announced results today and other preference shares are not moving.

No great surprise as so many of my HY shares have bombed as well.

taylor20
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Re: Aviva and General Accident preference shares

#123184

Postby taylor20 » March 8th, 2018, 2:20 pm

They are making noises about redeeming them. I sold the lion's share of my GACA last week so not hurting as much as it could.

I'm keeping an eye on Mark's site: https://www.fixedincomeinvestments.co.u ... es-at-par/

thebarns
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Re: Aviva and General Accident preference shares

#123190

Postby thebarns » March 8th, 2018, 2:26 pm

Taylor20,

A vey astute sale last week by yourself !

I eventually found the offending paragraph in amongst the voluminous reams of guff in their report, indeed stating that it is ther intention to redeem these at par, whilst balancing the needs of ordinary and preferred shareholders !

One wonders how indeed they are balancing the need of preference shareholders, who will not be the management !

Aaaaargghhh again !

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Re: Aviva and General Accident preference shares

#123221

Postby hiriskpaul » March 8th, 2018, 3:29 pm

I don't hold these, but held a small number of GACA in the past. As far as I can remember there is no right of redemption other than on winding up or return of capital, but return of capital cannot be achieved by say simply buying back some of the ordinary shares. Also any variation of rights on the prefs will require approval of pref holders. So not sure how Aviva can bring this redemption on par about. I certainly cannot recall any right to redeem simply because they no longer count as regulatory capital either. Hard to see how redemption can be straightforward or Aviva would have redeemed long ago. Maybe they have had some clever QCs working on this...

I will watch with interest!

thebarns
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Re: Aviva and General Accident preference shares

#123232

Postby thebarns » March 8th, 2018, 4:13 pm

Hirsikpaul,

Blast, was sort of hoping you held some of these as you appear to be a font of some knowledge re some fixed interest holdings, including preference shares.

Aviva prefs have dropped 23% so far today.....

I tried to sell via two high profile and large online brokers, both of whom were easy enough to facilitate purchases online, however they could not get a price, probably cause everyone that held these were running for the hills.

I suppose we should all immediately consider the impact on other preference shares, I hold a number, but am aware that some of them appear bombproof with no ability to redeem. Until some rapacious lawyer or overpaid management employee decides to stick one up naive income seeking preference shareholders !

Not easy this lark of trying to provide your own income in retirement, without some cosy defined benefit no risk pension to fall back on !

thebarns
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Re: Aviva and General Accident preference shares

#123238

Postby thebarns » March 8th, 2018, 4:29 pm

I have found the prospectus and it does appear to say that the irredeemable preference shares cannot be redeemed without the approval of preference shareholders - it does not say ordinary shareholders.

So on the face of it, it does not appear right.

However I am sure that they would not have issued this statement of intent were they not fairly sure that this layman interpretation could be overridden and effectively ignored.

I would book some anger management course, however my depleting future income dictates it will need to be a walk instead !

Another ugly side of capitalism shafting naive retail investors.

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Re: Aviva and General Accident preference shares

#123241

Postby AleisterCrowley » March 8th, 2018, 4:46 pm

I have a small dollop of AV.A 8 3/4% CUM IRRD PRF

Currently in profit by about £15 ...shall I dump?

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Re: Aviva and General Accident preference shares

#123248

Postby swill453 » March 8th, 2018, 5:04 pm

AleisterCrowley wrote:Currently in profit by about £15 ...shall I dump?

Dunno. I've got a larger lump, still up 10% from when I bought it many years ago, but down over 25% today of course.

I haven't bought and sold anything in my SIPP since I retired 4 years ago, I was rather hoping I'd never have to, just get a steady income from it.

It's a real bummer when something like this happens, makes me nervous about my other preference shares. They make up less than 10% of my portfolio, but I saw them as the less volatile part!

Scott.

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Re: Aviva and General Accident preference shares

#123252

Postby Alaric » March 8th, 2018, 5:26 pm

I found this on the website

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

We noted at our 2017 full year results that we have the ability to cancel the preference shares issued by Aviva plc and GA plc, at par value (plus accrued interest, arrears and in the case of GA plc, issue premium), through a court approved reduction of capital, subject to the approval of the relevant issuer's ordinary and preference shareholders voting together.


What that doesn't say is whether the preference shareholders have power of veto. If they don't, then it's false representation for Aviva to have presented these shares as irredeemable. The critical point is that the coupon is now well above what would be available if such shares were to be a new issue. If there's no redemption option, the prefs would stand at well above par. With a redemption option, such premiums will disappear.

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Re: Aviva and General Accident preference shares

#123255

Postby gcdonaldson » March 8th, 2018, 5:42 pm

There is something contradictory about "irredeemable" and a "return of capital equal to the nominal amount".

I don't think ordinary investors were aware (I have never read anywhere that preference shares can be paid back at par) and took "irredeemable" at face value. I notice that Aviva are giving holders fair warning and wonder why they are not immediately informing us that they are "returning capital".

Possibly, they are hoping to lower the price to allow themselves to buy back in the open market.

gcdonaldson

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Re: Aviva and General Accident preference shares

#123260

Postby Alaric » March 8th, 2018, 6:10 pm

gcdonaldson wrote:I notice that Aviva are giving holders fair warning and wonder why they are not immediately informing us that they are "returning capital".

Possibly, they are hoping to lower the price to allow themselves to buy back in the open market.


It needs to go through a Court process apparently. A sticking point is whether the Pref shareholders have power of veto , as without it, Aviva are confiscating wealth to the benefit of ordinary shareholders.

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Re: Aviva and General Accident preference shares

#123261

Postby hiriskpaul » March 8th, 2018, 6:16 pm

Just had a quick look at the GACA prospectus. I suspect they think they can exploit clause 4(iii) on page 6. I would post, but the prospectus I have is a PDF containing a scanned copy, so cannot simply cut and paste the text. Will post later if I can figure out how to post an image. My immediate priority though is such clauses in the prospectuses of stuff I do own! I am reasonably confident there are none for the bank prefs NWBD, SAN, LLPC/LLPD, STAB/STAC, but I am going to re-check...

This could be an uphill battle for pref holders if Aviva want to do a Lloyds ECN job on pref holders. On the other hand, it could present a buying opportunity if Aviva have it wrong. Having been caught out by Lloyds clever QCs I would want to be really sure of my facts before I called Aviva's bluff on this. Even then, if it looks black and white that Aviva are talking b******s, the experience with Lloyds clearly shows that this sort of thing is difficult to fight. Even if you can get it into court, judges can end up delivering interesting verdicts.

If this goes like Lloyds ECNs, today's announcement is round 1 - softening up of pref holders. Having driven the market price down, round 2 may be an LME above par, but below fair value, with the threat of redemption at par ("Return of capital at par"). Round 3 is then compulsory redemption, even if these are supposed to be irredeemable. OTOH if Aviva are sure of themselves they may just go ahead and announce redemption, then sit back and deal with any threats of litigation as it appears. Big holders can be bought off with NDAs to keep this out of court.

Pref holders should be under no illusion that the threat of redemption at par is real and that any regulators, including the FCA, could not give a toss.

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Re: Aviva and General Accident preference shares

#123263

Postby swill453 » March 8th, 2018, 6:24 pm

hiriskpaul wrote:Pref holders should be under no illusion that the threat of redemption at par is real and that any regulators, including the FCA, could not give a toss.

Yes it'll be hard to get any sympathy when you just know the headlines are going to be "greedy spivs fight to keep 8.75% interest while the rest of us make do with a pittance".

Scott.

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Re: Aviva and General Accident preference shares

#123265

Postby gcdonaldson » March 8th, 2018, 6:33 pm

I have just copied this off the Aviva website
https://www.aviva.com/investors/share-capital/

What are cumulative irredeemable preference shares?

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.

How do they differ from ordinary shares?

Your preference shares do not carry any voting rights and you are not normally entitled to attend the Company’s general meetings, although you may attend and vote on any class meetings that may affect your rights as a preference shareholder. However, on a winding up, preference shares carry a preferential right of return of capital ahead of the ordinary shares.

According to their notice, provided by Oldboyreturns, Aviva have the ability to cancel preference shares at par "subject to shareholder vote and court approval".

https://www.fixedincomeinvestments.co.u ... es-at-par/

My interpretation that this would be subject to holders of the preference shares and not ordinary shareholders, as the type of shareholder is not specified and I would not expect shareholders in another company to have a vote.

Is it likely that preference shareholders would vote to receive just a £1 for a share providing a 8% dividend?

I am not a lawyer and would welcome any thoughts.

gcdonaldson

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Re: Aviva and General Accident preference shares

#123271

Postby OwenSwansea » March 8th, 2018, 6:50 pm

Unfortunately, it appears that both the ordinary shareholders and the preference shareholders will be entitled to vote on this issue.

As usual, the retail investor is going to be stuffed!

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Re: Aviva and General Accident preference shares

#123304

Postby thebarns » March 8th, 2018, 10:01 pm

I note from the fixedicomeinvestments website discussion on this that John Lewis redeemed 7.5% preference shares fairly recently at £1.50.

What chance Aviva management acting with any honour at all in this fiasco ?

What part of irredeemable do they think a retail,investor does not understand or did they want them to get caught out by obscure small print and consequent interpretation ?

Fair enough if they pay a fair market value and the John Lewis valuation is a recent precedent for a 7.5% coupon.

Or do management just want to serve themselves as usual boosting the ordinary share price at the expense of pulling one off against the vulnerable retail preference shareholder ?

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Re: Aviva and General Accident preference shares

#123315

Postby AleisterCrowley » March 8th, 2018, 11:15 pm

What chance Aviva management acting with any honour at all in this fiasco ?
Approximately zero.
Most senior managers, in the financial sector particularly, are self-serving reptilian spivs who'd sell their own grandmother to a vivisectionist

thebarns
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Re: Aviva and General Accident preference shares

#123322

Postby thebarns » March 9th, 2018, 12:16 am

Aleister,

Sadly and despairingly, I agree with you.

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Re: Aviva and General Accident preference shares

#123364

Postby hiriskpaul » March 9th, 2018, 8:59 am

Last night, having been through various prospectuses for LLPC, NWBD, etc. and Articles of Association I concluded that if Aviva get away with this return of capital wheeze, then the others are likely to be able to as well. Judging by market prices this morning, others have reached similar conclusions.

Only seems to apply to prefs though - PIBS look safe, as do corporate bonds.

thebarns
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Re: Aviva and General Accident preference shares

#123369

Postby thebarns » March 9th, 2018, 9:06 am

Having thought yesterday was bad, now today I see all my preference shares have tanked !!!!

Do I have the words to correctly convey and express what I think about this ?

I know exactly what I'd like to do to the lot of them.


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