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
https://www.aviva.com/newsroom/news-releases/2018/03/FY2017-results-announcement/
https://www.aviva.com/newsroom/news-releases/2018/03/FY2017-results-announcement/
Comments
Look forward for any further information
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!
“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
http://www.fixedincomeinvestor.co.uk/x/forum.html#/discussion/485/aviva-intend-to-buy-back-hybrid-debt
https://www.fixedincomeinvestments.co.uk/discussion/topic/aviva-scheming-to-redeem-preference-shares-at-par/
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)
https://www.lemonfool.co.uk/viewtopic.php?f=52&t=10506
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:-
https://www.lemonfool.co.uk/viewtopic.php?p=124253#p124253
I am sory to point people in other directions but this is a class post
https://www.aviva.com/investors/credit-investors/Additional-information-for-preference-shareholders/
This Robbery amounts to £304.7 million (market price valuation less par)
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.
whilst they have not made any statements this feels overdone and i have bought some
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
Woz
Amazing result
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AV./13578436.html
There is identical one for GA Prefs
Wewll donen Mark Taber plus everyone else that made out the case for private investors
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 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
Woz
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 ??? !!
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!
http://citywire.co.uk/money/avivas-climbdown-still-leaves-prefs-in-a-mess/a1105095?ref=citywire-money-latest-news-list
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/other/13610222.html