Alaric wrote:ChrisNix wrote: Compliance with law and the terms of an instrument is not coercion in the eyes of most people, and certainly not in those of the courts.
It's coercion in my eyes. There's a stream of payments which stretches out to infinity. If the payor wants an option to be able to cancel that stream at a time of their notice and pay below market price, they should pay for being granted the option. For example by paying a higher coupon than on a superficially similar instrument such as PIBS which don't have such coercive rights.
Have now managed to get the meat of the HofF decision.
The interesting thing is that, notwithstanding being paid a good premium to the market price (i.e the issue price), the pref holders were, in essence, contending that they could as a class simply determine not to relinquish them at any price (a form of infinite payment stream argument?).
The court gave this no truck.
Quoting precedent it was noted:
"In Re Chatterley-Whitfield Collieries Ltd. the court were considering the rights of preference shareholders to whom it was proposed to return the whole capital paid up on their shares. In that case it was stressed that reducing the capital of a company by returning to the preference shareholders the whole capital paid up on their shares is completely consistent with the preference shareholders' contractual rights. There is no question of a company which has once issued preference shares being bound either to keep them forever or to arrange its affairs so that it is always left with a certain amount of preference capital.".