Aviva - Now who is making things up?

[GoSeigen]

Over on Mark Taber's site, one investor has been working away behind the scenes, reading the documents and looking at the evidence. That person is jimgh1948, who has posted some very interesting information from time to time.

However, his latest post is a gem and trumps any I have seen on this topic since Aviva's results, even Avidya's excellent analysis. jimgh1948 has been looking back at General Accident plc Statutory Accounts as notified to Companies House. In the results of 2012 he made the astounding discovery of the following note to note 11 Preference Share Capital:

https://www.fixedincomeinvestments.co.u ... #post-2313
Company’s irredeemable preference shares are listed on the London Stock Exchange under a Standard Listing. They are irredeemable but, subject to the provisions of the Companies Act 2006, the Company may at any time purchase any preference shares at either par or on the prevailing market price upon such terms as the Board shall determine.

I have verified his work and confirm that what he says is true. The key section is in bold.

For some days, there have been claims that the management of Aviva had for years not informed the market of their ability to repay their preference shares at par, and certain people have been briefing the press and media to this effect. Holders have eagerly posted extracts of the resulting press articles.

Well, it turns out that was a pack of lies. As shown by jimgh1948, Aviva's subsidiary General Accident plc, the issuer of the 8 7/8% and 7 7/8% preference shares, has been warning since at least 2012 in its statutory accounts filed at Companies House that the preference shares were subject to repayment at par. I haven't checked many other years' accounts yet, but urge holders to do so; the same information is in note 5 in 2011, and I have no reason to doubt that the warning is repeated in other years.

Not only does this expose the nonsense that has been fed to the media about Aviva's alleged market manipulation, it also shows the negligence of the professional investment community who claim to have known nothing about this fact, when the information was right under their noses for years in the company's statutory accounts. Am I to believe that these professionals with a staff of researchers and analysts cannot be bothered even to read the issuers' accounts?


Again, I think jimgh1948 really deserves credit for his efforts. I don't necessarily agree with your interpretation, jimgh1948, but I thank you for your conscienscious and dogged work -- if you are reading these messages.


GS

[GoSeigen]

Unbelievable, the note is right there in General Accident's annual reports posted on the Aviva web site. This one from 2015 page 23:

https://www.aviva.com/content/dam/aviva ... ements.pdf

The Company’s irredeemable preference shares are listed on the London Stock Exchange under a Standard Listing. They are irredeemable but, subject to the provisions of the Companies Act 2006, the Company may at any time purchase any preference shares at either par or on the prevailing market price upon such terms as the Board shall determine.


Absolutely no excuse for professionals not to have seen this if as alleged they do actually claim ignorance. They need to explain themselves.


GS

[johnhemming]

They have used various forms of words over the years. They started using this form of words in 2011. This, however, talks about a purchase not a capital reduction. Their argument is that a capital reduction is somehow something specifically different in terms of the company - investor relationship.

4 (iii) in the 8 7/8 GA says "other than ... redemption or purchase ..."

Hence this cannot apply for the annual report from 2011 onwards because they use the word "purchase".

[GoSeigen]

They have used various forms of words over the years. They started using this form of words in 2011. This, however, talks about a purchase not a capital reduction. Their argument is that a capital reduction is somehow something specifically different in terms of the company - investor relationship.

4 (iii) in the 8 7/8 GA says "other than ... redemption or purchase ..."

Hence this cannot apply for the annual report from 2011 onwards because they use the word "purchase".

Rubbish John. This is sophistry. You [holders] were making it up about never having been warned, and now you [John] are making it up that you'd known about these warnings all along but knew that they meant something else all along and disingenuously didn't mention the topic EVEN ONCE in days of my discussions with you. Next you will invent the story that you knew Aviva/GA said "par" but they were talking about their golf scores and not the terms of the bonds.

If you knew about this wording in the accounts point to a single post anywhere in the last five years where you have been involved in discussing it.


In other words put up or shut up. I'm now the one who is furious at the disgusting abuse aimed in my direction of late and the shocking lack of responsibility that has been shown by holders of these shares who have not mentioned even ONCE in the reams of whining that I have read the past few days the fact of this particular text in the results of their company. If I am wrong, link to the posts discussing this.


This morning I have sold all our remaining preference share holdings (in NWBD). We remain Aviva ordinary shareholders.


GS

[Alaric]

subject to the provisions of the Companies Act 2006,

I suppose you or perhaps Aviva are saying that these provisions allow the Preference Shareholders to be out-voted on whether Aviva are allowed to cancel their future income without market value compensation. Otherwise it's equivalent in usefulness to statements on a packet of peanuts "may contain nuts".

If true, a wider issue is why the Aviva directors allowed a false market in the Pref shares and how it can be that the Companies Acts can take away rights in this manner. The Treasury Select Committee have asked the FCA to respond on similar issues.

Is it accepted that in 1992, it was NOT the intention of those lending money to Aviva and General Accident in the form of Preference Shares to grant those companies a right to cancel at par almost whenever they chose?

[johnhemming]

Rubbish John. This is sophistry.

If it is sophistry to worry about the word "purchase" it is also the same to worry about the word "redemption".

I have only recently invested in these particular prefs and the reason why I did so was that I thought Aviva were wrong. Hence I have not done any research into the Aviva prefs issue prior to their announcement. It didn't take long to look at all of the GA annual reports. All you have to do is to find the note to the accounts about shares. First they do ordinary shares then they do the prefs.

Their view in 1992 is the key issue (it indicates their intention in the contract). If they change their mind in 2011 whether they are right or wrong has no legal signficance.

What they now have involved is:
a) 15% of Ordinary shareholders institutions and 30% of the prefs from the city (todays news) meeting the chair.
b) The Treasury Select Committee
c) The FCA investigating the issue.

More flack as a company on an ethical question than they have probably seen before - and it is only likely to get worse.

You should note in the letter from Nicky Morgan the question about how the legal certainty issue is to be resolved. The market as a whole needs this.

[PeterGray]

They are irredeemable but, subject to the provisions of the Companies Act 2006, the Company may at any time purchase any preference shares at either par or on the prevailing market price upon such terms as the Board shall determine.

It's certainly an interesting statement - but is it as clear cut as you suggest?

I think it could well be argued that there is as much room for debate about what that means in practice as there is about "irredeemable", and its friends.

Firstly, clearly it's subject to CA2006, so the debate about class votes is unanswered. Secondly, what exactly is meant by a "purchase". Does the sentence mean compulsory purchase, or does it mean the sort of repurchase that they authorised at the 2016 AGM?

If you read Aviva's "Additional Information" (15th Mar 2018) para 5 it says:

Condition 4(iii) of the terms of each issue of preference shares sets out the preference shareholders’ entitlement on a return of capital (other than on a winding up, redemption or purchase). This would apply on a return of capital following a reduction of capital through which the preference shares are cancelled.

it says 4(iii) does NOT apply in case of a "purchase", and so they are not talking about a "purchase" of prefs currently, but something else.

Peter

[GoSeigen]

Rubbish John. This is sophistry.

If it is sophistry to worry about the word "purchase" it is also the same to worry about the word "redemption".

I have only recently invested in these particular prefs and the reason why I did so was that I thought Aviva were wrong. Hence I have not done any research into the Aviva prefs issue prior to their announcement.

Well, I have every sympathy for you John, but this was foolish and you have suffered for it. Let it be a lesson for the future. I have made far bigger losses than this (100% on several occasions). Write it off, pick yourself up and promise yourself that in future you'll pay more attention to price.

Meantime, thank you for your time and patience and your support against occasional abuse aimed at me which was noticed and appreciated. But our discussions are over for now.


GS

[GoSeigen]

They are irredeemable but, subject to the provisions of the Companies Act 2006, the Company may at any time purchase any preference shares at either par or on the prevailing market price upon such terms as the Board shall determine.

It's certainly an interesting statement - but is it as clear cut as you suggest?

Peter,

1. What right to purchase at par were they referring to?
2. Where is previous discussion about this "odd"[not my belief] wording?
3. Please, anyone, post a copy of somebody's -- anybody's -- letter to Aviva querying this wording and a copy of their reply. Someone must be a friend of those professionals. Ask them. You may quote it suitably redacted.


GS

[johnhemming]

Well, I have every sympathy for you John, but this was foolish and you have suffered for it. Let it be a lesson for the future. I have made far bigger losses than this (100% on several occasions).

I have not made a loss (my average price is under the current bid). Those people who have not sold have not crystalised a loss and may not make a loss. We don't know where this will end up, however.

[flyer61]

Interestingly, this morning the market in AV. and GA prefs seems to think (maybe) that this will be resolved above par.....

Having thought about it, this was only going two ways if Aviva insists on cancellation at par. The public court and the court of public opinion.

I am firmly in the court (now) of they will back down.

I looked through my funds to see who held Aviva prefs and was not surprised to find them everywhere. Some of the supposed brightest minds in the fund management industry are either not what they claim to be and have royally balls up or they assumed it was always business as usual in their world.. ....There are egos all over the place that will be squealing over this....

Goseigon, thanks again for putting a size 10 up my backside to sit up and pay attention...

Finally, I would still like the FCA to look into all Aviva fund transactions involving their Prefs pre March 8.