The Lemon Fool

Study the chart (see ADVFN link below) and you will instantly see why I believe further rises are in order for the AVIVA prefs.

Set aside the interest rate scenario and look at where the AVIVA prefs are trading versus ELLA. (Ecclesiastical Ins. 8.625% pref)

You will see the cataclysm of the appalling attempt to redeem the Aviva prefs at low levels. Aviva naturally backed down when the [expletive deleted] hit the proverbial, even with questions in Parliament.

Aviva will never try to do the same thing again, so really the prefs should be back tracking ELLA, but no, they've been trading at a 10%-15% discount ever since. At the moment ELLA yields 5.55% versus 5.93% for AV.A & 6.06% for GACA.

There is also of course the scenario suggested on the AV.A thread that Aviva may make a fair and general offer as part of a capital restructure, if so, then quids in! I'd accept a 5% yield; though institutions might insist upon 4.75% - that would be 187p for GACA versus the current 146p.

Whatever, I confidently expect the ELLA gap to narrow; and will enjoy the 6% yield whilst waiting.

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Why ELLA as comparator? As opposed to, say, RSAB, which are yielding 5.9%?

ELLA & RSAB would be equally good as comparator as RSAB too suffer from the "Aviva Action" discount - see ADVFN's RSAB thread for the chart.

I prefer the Aviva prefs for both the marketability and the trading choice between the 4 - AV.A; AV.B; GACA & GACB.

The difference is more than that; AV.A/B, GACA/B and RSAB are all cumulative, whereas ELLA is non-cumulative and as such should yield half a point more.
It yields less because Ecclesiastical have said that they will not attempt a forced redemption and the market believes them, whilst suspecting that Aviva or Royal may still attempt to pull a fast one.
I hold AV.A but am not inclined to add.

General Accident is particularly vulnerable imv, as the company now exists only in a Cheshire cat fashion through its prefs. Thus there are no ords holders to ride to the rescue if Aviva decides to mess about.

V8

88V8 - thnx for that; but there's not a cat's chance in hell of Aviva trying the same trick again - politically impossible.

But the current ELLA discount exists because of the credibility gap you typify. As Aviva does or states more to deride
that view - the discount will close. Just a matter of both credibility and time.

“preference shareholders can rest secure in their holdings,” said Aviva.

https://citywire.co.uk/funds-insider/ne ... s/a1105095

SKYSHIP wrote: “preference shareholders can rest secure in their holdings,” said Aviva.

https://citywire.co.uk/funds-insider/ne ... s/a1105095

I don't see the quoted text in the linked article.

GS

GoSeigen wrote:

SKYSHIP wrote: “preference shareholders can rest secure in their holdings,” said Aviva.

https://citywire.co.uk/funds-insider/ne ... s/a1105095

I don't see the quoted text in the linked article.

GS

It's in the link from the word "climbdown" in the first sentence: https://citywire.co.uk/funds-insider/news/aviva-scraps-plan-to-cancel-preference-shares/a1104181?section=funds-insider
(Easily missed if reading the given link - but I happened to be curious so was following in-article links)

Skyship - thanks for the article ref. might be worth putting the direct link to quotes into future posts.

VRD

And now they're 120p, so redemption risk minimal, but not clear from what I've seen (haven't been looking) that they'll pay pref divs. Quelle irony.

ChrisNix wrote:And now they're 120p, so redemption risk minimal, but not clear from what I've seen (haven't been looking) that they'll pay pref divs. Quelle irony.

[Cough] Aviva prefs are all irredeemable. Thought we'd established that!



Perhaps you mean capital reduction risk? Funny that investors have decided for themselves that these are only worth 120p anyway! That's a very sensible price.

GS

GoSeigen

Interesting that Prefs have reared their head again. Glad you are still here to keep folk on the straight and narrow where these are concerned

I think that Irredeemable, Cumulative Preference Shares should form part of every HYP.

Owen.

GoSeigen wrote:

ChrisNix wrote:And now they're 120p, so redemption risk minimal, but not clear from what I've seen (haven't been looking) that they'll pay pref divs. Quelle irony.

[Cough] Aviva prefs are all irredeemable. Thought we'd established that!



Perhaps you mean capital reduction risk? Funny that investors have decided for themselves that these are only worth 120p anyway! That's a very sensible price.

GS

Thanks, for pointing out my sloppy language, GS!

Yes, I did mean capital redemption risk.

Do you hold any NWBD -- payment due today, I think?

CN

I have always assumed that GoSeigen and ChrisNix were the same person, very confusing!

Owen.

ChrisNix wrote:Do you hold any NWBD -- payment due today, I think?

CN

Good to see you back BTW. Yes, have a few NWBD and have added recently sub-120p. You?

GS [Talking to myself here, of course.]

It is refreshing to see that GoSeigen has not lost his sense of humour, despite the heavy losses that he is now sitting on.

Owen.

With all the bank shares crashing again, how safe are bank preference shares such as NWBD if the situation for banks keeps getting worse ?

If for example RBS was fully nationalised, or if RBS ordinary shares went to zero, would NWBD preference shares still have any value ?

Tara wrote:With all the bank shares crashing again, how safe are bank preference shares such as NWBD if the situation for banks keeps getting worse ?

If for example RBS was fully nationalised, or if RBS ordinary shares went to zero, would NWBD preference shares still have any value ?

In the first situation the Prefs would be bailed in, in other words holders would lose everything. If the shares go to zero the bank is worthless, my guess is it would collapse before then, in which case Pref holders would lose everything. The question is, how likely do you consider either of those two events.

Wizard wrote:

Tara wrote:With all the bank shares crashing again, how safe are bank preference shares such as NWBD if the situation for banks keeps getting worse ?

If for example RBS was fully nationalised, or if RBS ordinary shares went to zero, would NWBD preference shares still have any value ?

In the first situation the Prefs would be bailed in, in other words holders would lose everything. If the shares go to zero the bank is worthless, my guess is it would collapse before then, in which case Pref holders would lose everything. The question is, how likely do you consider either of those two events.

It appears that many investors are seeing these events as possible, or perhaps anticipating that banks will find ways to cancel dividends on prefs. LLPC offered now at 1.115

bruncher wrote:

Wizard wrote:

Tara wrote:With all the bank shares crashing again, how safe are bank preference shares such as NWBD if the situation for banks keeps getting worse ?

If for example RBS was fully nationalised, or if RBS ordinary shares went to zero, would NWBD preference shares still have any value ?

In the first situation the Prefs would be bailed in, in other words holders would lose everything. If the shares go to zero the bank is worthless, my guess is it would collapse before then, in which case Pref holders would lose everything. The question is, how likely do you consider either of those two events.

It appears that many investors are seeing these events as possible, or perhaps anticipating that banks will find ways to cancel dividends on prefs. LLPC offered now at 1.115

I don't think there is an issue with cancelling the dividend on LLPC or LLPD if no ordinary dividend is being paid, to be honest following the PRA letter I rather expected that to be the case.

I did see this post, but nobody seemed to run with it to confirm they had received a similar message...

viewtopic.php?f=15&t=22650&start=20

FrankSeymour wrote:I have contacted Lloyds re LLPC, “Preference shares not impacted by the dividend suspension...”
And RBS concerning NWBD
“ ..RE RNS ... There is a specific sentence stating that there is no impact for preference share coupons...”

So it appears, just like during the financial crisis we will continue to be paid.

GoSeigen wrote:

ChrisNix wrote:Do you hold any NWBD -- payment due today, I think?

CN

Good to see you back BTW. Yes, have a few NWBD and have added recently sub-120p. You?

GS [Talking to myself here, of course.]

I hold a fair number. Bargain hunting elsewhere at mo, but think they're great value at these levels.

CN