Aviva intend to buy back hybrid debt

for anyone holding Aviva 8.375% Perp Prefs - they are down 20+ points today on announcement they intend to buy back Preferred securities - no details i can see of the terms



  • Thanks for the update, very surprised, just looking at the name AV.A AVIVA PLC 8 3/4% CUM IRRD PRF #1, suggest that they are not redeemable, so therefore surely they must be offering a "Tender" for the shares, which one could reject?
    Look forward for any further information
  • Also applies to GACA,
    RNS News (GACA)
    The Company is part of the Aviva group and Aviva owns 100% of the Company's ordinary issued share capital. In this context the Board has noted that in Aviva's 2017 results announcement on 8 March Aviva advised that it was targeting more than £500 million in additional capital returns, incorporating liability management and returns to shareholders. In this regard, Aviva also noted the ability to cancel the preference shares at par value (plus accrued interest, arrears and in the case of the preference shares issued by General Accident plc, issue premium) through a reduction of capital, subject to shareholder vote and court approval and that the preference shares carry high coupons that are not tax-deductible and they will not count as regulatory capital from 2026. As the Company and Aviva evaluate alternatives, one of the things we are considering is how to balance the interests of ordinary and preferred shareholders.

    Not good news!

  • extract below from the prospectus

    “On a return of assets on a liquidation or reduction of capital of the Company, the
    holders of the Existing Preference Shares are entitled, in priority to any payment on
    any other class of shares, to payment of the greater of (i) £ l per Existing Preference
    Share and (ii) a sum per Existing Preference Share equal to the average of the means of
    the daily quotations (as certified by the auditor of the Company) at which the Existing
    Preference Shares have been quoted on the London Stock Exchange during the six
    months immediately preceding the relevant date after deducting from each daily mean
    any arrears or accruals of dividends, together with, in each case, a sum equal to any
    arrears or deficiency of the fixed dividend to be calculated down to the date of the
    return of capital, but are not entitled to any further participation in assets”

    so they will have to pay the average market price over the 6 months prior to the cancellation date

    I do not hold these btw
  • @ElmirToadface The terms are not so favourable for the 7,85% (GACB). There is no 6-month averaging provision as far as I can see. I sold mine today for a trading loss but, over the holding period, my yield was 4% so better than cash, at least.

  • Paddy - absolutely correct - there is also a lot being discussed on the issue here -I'm following both (plus this forum of course, but lot more happening on the other two at the moment)


  • Since writing the above, a well known and respected poster on the old Motley Fool board - (Avidya) - has come in from the cold and posted an incredibly detailed and well written analysis on the Aviva situation here:-


    I am sory to point people in other directions but this is a class post
  • Most of the Preference Shares are starting to rise gently, therefore I suspect maybe a good opportunity to purchase at few at the low point. ELLA with their announcement has pushed their price back to what it was originally (or very close)
  • bought a small amount of AV.A
  • The Great Train Robbery was the robbery of £2.6 million from a Royal Mail train heading from Glasgow to London on the West Coast Main Line in the early hours of 8 August 1963,
    This Robbery amounts to £304.7 million (market price valuation less par)
  • This is going to be a huge embarrassment to the senior staff at Aviva on Monday Morning, I just feel very sorry for those retail investors who may have lost a considerable part of their savings.
  • The following email has been sent to Mark Wilson

    Dear Mark,

    Would you or a colleague explain why you are not proposing to use the Prospectus Paragraph 7. Purchase Para (i) as the method to reduce the Company's Preference Share Capital?

    It is this section to which the annual report statement refers to each year
    Authority to purchase own shares At the Company’s 2016 AGM, shareholders renewed the Company’s authorities to make market purchases of up to 404 million ordinary shares, up to 100 million 8¾% preference shares and up to 100 million 83⁄8% preference shares.
    These authorities were not used during the year or up to the date of this report. At the 2017 AGM, shareholders will be asked to renew these authorities for another year and the resolution relating to ordinary
    shares will once again propose a maximum aggregate number of ordinary shares which the Company can purchase of less than 10% of the issued ordinary share capital. Details are contained in the Notice
    of AGM. The Company held no treasury shares during the year or up to the date of this report.

  • as an aside in the general fall out in the Pref market i am looking at the BTW 8.75 which unlike a number of other issues have not recovered any ground - sown from high 177 to 147
    whilst they have not made any statements this feels overdone and i have bought some
  • Not 100% sure which share you are referring to - Bristol Water 8.75% BWRA ?
  • correct - sorry i was using the Bloomberg shorthand
  • I had been looking at these a few weeks ago and decided not to purchase, and so hadn't been checking recently, so thanks for this

    I had made a rough rule not to buy any more perpetuals (aka non-perpetuals since a week or so ago !!)

    However, I am temped. Been trying to find the prospectus, so far no luck. Can you point me to where I might find it ??? Meantime I'll continue to look

    Price was 147p when I checked a short time ago

  • Bought 10k @ £1.4512, as a small punt. However imho the higher the price the bigger the potential loss. Also the company is not traded on the LSE, and the investment company shareholders might not have many ethical issues in redeeming them, if it could.

  • Amazing result


    There is identical one for GA Prefs

    Wewll donen Mark Taber plus everyone else that made out the case for private investors
  • Hmmm, bet the advisers that came up with the idea still get some fat fees. Feel sorry for the investors that panic sold. I think these prefs were a little over bought prior to the sell off, so they will probably settle below recent highs.
  • Also Mark Taber does deserve a huge amount of credit.
  • edited March 2018
    Agree credit to all however imho the deputation of institutional investors including 2 of their top 5 Ords holders will have tipped the scales

    Note for the future

    "Under current regulation the preference shares will no longer count as regulatory capital in 2026. Aviva will work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards. If as we approach 2026 Aviva needs to reconsider this position, it will do so after taking into account the fair market value of the preference shares at that time"

    these are now in effect perpeutal debt with a "call" at or before 2026 at or around fair market price therefore all else held equal the price would not get back to prior levels

    over time I would not be surprised if all Financial issuer preference shares were "bought back" in the loosest sense (at a fair market price) - as they not longer count as capital and thus become very expensive funding

    we will all need to look to other asset classes for income over time methinks

  • I think the main factor here was the institutional investors holding both ordinary and preference shares, plus the fact they also hold the other well known suspects (Lloyds,Santander, Natwest etc etc) and despite the feeling of a strong degree of safety in the latter, contagion was still feared.

    I also think the efforts of Mark underlined the fact to them that there really was a moral/ethical issue here, so when it came to abandoning the idea they could , for once, actually make out as if all their Mission Statements and the like meant something to them

    I also think that Mark had a big hand in making sure the staement they made went as far as it is possible to convince people they are not going to try anything like this again.

    As well as representing most of the readers of this and the other two forums, Mark has encouraged all of us to debate the issue and to write letters to the prominent actors

  • Elmir

    I agree with your Note for the Future

    In fact I suspect we all have had this lurking at the back of our minds - I had made a decison to slowly retreat from irredeemables/perpetuals, but all the time thinking that the fall back position would be accepting a fair market offer from the issuer.

    It would not surprise me one bit if we haven't heard the end of this as far as the non-Avivas are concerned - it must be the Holy Grail for the bright young wiz kids trying to climb their way up the financial and/or legal departments of the issuers. I don't think it will be as drastic as Aviva's recent attempt, but could be along the lines of a new special instrument - we will see.

    Yes- we need to look for other asset classes - any ideas anyone ??? !!
  • Good result, well done Mark!
    One possible outcome is that there is likely to be number of new retail investors investing in Prefs, thinking of the coupon rate only, thus reducing the yield.
    In 3 or 4 months, could be worth reviewing whether to scale down the amount held in this class of investment, a rise in interest rates could make a big dent in valuation!
  • I'm always a little uncomfortable paying a large premium over the issue price on debt, I think because if the company defaults you only have a claim for the original issued amount. I think Aviva will wait for other sharper operators (Lloyds?) to set a precedent before they make another move.
  • AV.A traded up to 162 on open and has subsequently traded down most of the day to 152, I think they will eventually settle lower than recent highs, which looked over bought to me.
  • Exc ellent letter from the FCA to all issuers of Irredeemable Perpetual Permanent Everlasting Eternal shares etc

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