Harry at The Times would like you to send him your message,
just had contact with him over the 'Gerald Ratner Moment'.
So you can perhaps get your view through in The Times, but
you need to send it ASAP, so that they may incorporate part
of it, with your permission (which will be asked).
ASAP, is the word here.
Paul 1945 - Could you send that same message to The Times,
per email to: [email protected], he deals with
Aviva associated matter, and your email will be of interest to
him. Tell him a person called John asked you to do so.
(I hold on to my pen-name here). Harry will know who you
are talking about. Be speedy, for results.
I sold my £35k of av. kept av.b will + L& G. All the directors not AVIVA should be charged with creating
a false & disorderly market on L.S.E. which is a very serious accusation in AV.IRR & GACA they fell 30% & knocked up to £1bn off LSE F.I.
Market. Which may never fully recover some investors will have lost money they maybe should look if they can take some action against Aviva Directors perhaps we all could we need to lodge
complaints to London S. E. & FCA see how they like. Still in state of shock & anger.
Well done everyone sorry for typing etc.
E&OE IMHO DYOR
Statement on Aviva plc and General Accident plc preference shares
Since the full year results announcement on 8 March 2018, Aviva plc ("Aviva") has heard a wide range of views on its preference shares*, has spoken to a large number of investors and has received strong feedback and criticism.
As a result Aviva has listened. Aviva announces that it has decided to take no action to cancel its preference shares.
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.
On 8 March 2018 Aviva stated it has the ability to cancel the preference shares at par value, having received clear legal advice. The review of the preference shares was initiated as a result of Aviva's duty to examine what is right for the business, balancing the interests of ordinary shareholders and preference shareholders. Aviva needed to address the issue of the preference shares given regulatory capital considerations and their cost.
Aviva is in a strong financial position and still plans to deploy GBP3 billion of excess cash in 2018 and 2019 to reduce hybrid debt, fund bolt-on acquisitions and buy back ordinary shares.
Mark Wilson, Group Chief Executive Officer of Aviva plc, said:
"I am very aware that Aviva is in a position of trust with our customers and investors. To maintain that trust it is critical that we listen to and act on feedback. The reputation of Aviva, and the trust people have in us, is paramount. Our announcement today means that preference shareholders can rest secure in their holdings.
The Board and I have a duty to consider not just the financial implications of our actions. We must consider the impact to Aviva's wider reputation. I hope our decision today goes some way to restoring that trust."
*Preference shares issued by Aviva plc and General Accident plc
As many on this board may be aware, there's an active discussion on the pref issue on the AV.B board - for anyone interested, I repeat below my recent post there, in the wake of this further "announcement" yesterday from Aviva.
FWIW I read this statement differently from the thrust of the article highlighted by IOMINVESTCOM - they are on the back foot now, and primarily defending the original statement, not (as yet, anyway) any decision to proceed.
Of course... I could be wrong! But any Financial Services business lives and dies by the integrity of its reputation and the confidence of its stakeholders.
"Certainly seems that they are determined to continue with their plan, and as you say it sounds ominous for GA pref holders as they clearly control the vote there."
An interesting statement indeed from AV, though I actually read it the other way... I see it as a the first stage of a face-saving operation, designed to clarify and defend the original statement, not the final decision to proceed - which, as they have gone out of their way to make clear, has not been taken.
The outcry has been vociferous, from both private and institutional investors alike, with action groups quickly assembled, intense media lobbying and various veiled (and not so veiled) threats levelled. This continues as long as the situation remains up in the air, can only build from here... and will become explosive indeed upon any indication they intend to proceed regardless.
I see a back-down as most likely, if not quite inevitable, for which they are already preparing the ground... though I agree, the additional comment on the GA issue was probably unwise in the current, highly charged climate, though may also have been intended as clarification of the legal situation.
FCA just rang me u suddenly realise the further u go u see what other people are saying is
true, complete waste of time speaking to FCA but perhaps just ring and register a complaint. Look on Aviva scroll down and you will see comment from company a few minutes ago I think there is a good comment page on this site which would be good for us all to put our views on as it looks like we are on our own. I am completely astounded with their attitude like an absolute fool I expected some sort of gentle climb down. As an ordinary shareholder I feel with all this very bad publicity I am shooting myself in the foot. It feels like Mr Wilson is having a
Gerald Ratner moment. I think I may be £30k down on my fixed interest stocks because of this one statement from my company. As others have said Mark Taber is the best person for us, I would certainly pay into a fund for MT. City Wire obviously are good perhaps others could give other web sites. Thanks for all help and comments wife is typing!
Paul - Thanks for your clarification. Not nice to see one' s investment
drastically devalued, especially when it was supposed to be in the
'risk-free' category with the only risk being Aviva going belly-up.
The crucial word in this debacle is IRREDEEMABLE. Aviva has avoided
mentioning that crucial word. as it would clearly not have sounded too
if they had stated: "We intend to redeem our Irredeemable
Shares at massively below market price."
I remain of the opinion that Irredeemable Shares can not be redeemed
against the will of the owners. If the British Courts do not stand behind
the owners, then a judgement needs to be sought in The Eurpean Court
of Human Rights.
Are there any lawyers here who can comment on section *** of the companies act which requires a 75% vote in favour of each class of shares before cancellation can take place?
I think its section 603 or 630 but not really sure.
Sorry missed u off my previous post thanks4 tele note go to aviva website scroll down Wilson
joins Blackrock perhaps they went short of IRRED that are redeemable small mention in times from Ecclesiastical also posts on CITY WIRE
sorry FCA written to av asking them to comment re their statement on IRRED
sorry not 2 good with tech & even worse typing with 1 finger very very slow but 50yrs
exp. on stock exchange. Did u c 2 posts from jezinho selfish ord. holder & my reply. Like u &
soi bowman prefi iom some very clever people on here. prob. i have is i have lots to share but this has taken hours 2 type! is this wilsons gerald ratner moment i am big hold of ord pref & gen acc. & other fixed int. & fairly large portfolio all the best
Do you hold any Irredeemable which means never redeemable prefs or Gen Acc. Pref ? or
did you buy any at 150 or170 p which was the market price? Have you asked the people or given this
opinion to the poor devils that did to have them redeemed @100 even in todays capital market
is that not very real money lost in todays capital markets do you own ordinary shares as directors do would you like them redeemed at their nominal value? Very best regards
Those accounting standards about having debt on your books at mark-to-market apply only to when you have a debt trading book. If it is debt that you have borrowed, then the book value is the actual outstanding amount.
There seems to be some confusion amongst posters about the status of pref shares; whilst they may have a fixed coupon, they are not debt. They are not held on the balance sheet at market value as they don't belong to the company but to the holders. Thus any redemption is P&L neutral and if the cost of that redemption exceeds the nominal value, then the reserves will have to be reduced accordingly.
I hear what you say about the shares being irredeemable but there must come a point when a company should be able to say it has atoned for the sins of its fathers, so to speak. These pref shares were issued some 25 years ago and their holders have had a pretty good run. They are arguably something of an anachronism in today's capital markets.
Thousands of investors in Aviva (AV +
) preference shares have been dealt a blow after the insurer signalled it may seek to cancel the high-yielding investments.
The insurer revealed it is considering cancelling £450 million of preference shares, which will save it £38 million a year in coupon payments.
The shares feature high fixed dividends of between 7.875% and 8.875% and their strong yields had led to them trading at high premiums to their 'par' values, or issue price.
Aviva's threat to cancel the shares at par value, announced alongside full-year results on Thursday, sent them tumbling. Aviva's 8.75% preference shares are down 30.7% since the announcement, while the 8.375% shares have dropped 28.8%.
Preference shares issued by General Accident, the car insurer which merged with Aviva predecessor Norwich Union in 2000, have also been hit by the news. Its 8.875% preference shares have fallen 30.3%, with the 7.875% shares dropping 22.1%.
Aviva warned in its full-year results that it had 'the ability to cancel preference shares at par value through a reduction in capital, subject to shareholder vote and court approval'.
'The preference shares carry high coupons that are not tax-deductible and they will not count as regulatory capital from 2026.'
Bond expert and investor activist Mark Taber of Fixed Income Investments has written to Aviva on behalf of the 580,000 retail investors who could see their incomes hit.
He said that the insurer had made no previous public reference to believing the preference shares could be cancelled at par without a class vote [of the holders] and that the prospectus stated they shall not be redeemable, save with the approval of the holders.
Taber criticised the insurer for the way it has gone about trying to redeem the preference shares, involving ordinary shareholders who are likely to vote for redemption in order to save £38 million in coupon payments and whose votes outweigh those of the preference shareholders.
Taber added that for many years the market has priced the preference shares on the basis that they cannot be redeemed without class consent of holders or a winding up of the company.
Aviva will have been well aware of this and has taken no steps to inform the market otherwise, he said.
The news also knocked the broader preference shares market. Insurer Ecclesiastical, whose preference shares dropped 11% on Aviva's announcement before rebounding, issued a statement to the market yesterday reassuring investors.
'Ecclesiastical notes Aviva's governance statement that "as one of the biggest companies in our sector, we aim to make our industry work better for everyone",' it said.
'Ecclesiastical trusts that Aviva will follow the principles set out in that statement when considering whether to pursue this course of action.'
Ecclesiastical is also a holder of Aviva and General Accident preference shares, but said the holdings were 'not material in size in the context of Aviva's announcement and Ecclesiastical's balance sheet strength'.
The situation with Aviva mirrors that of Lloyds (LLOY +
) in 2016, which bought back £3 billion of bonds from investors but not before a Supreme Court battle.
The enhanced capital notes paid a generous 10% interest but the court ruled that the bank was within its rights to redeem them despite a campaign headed by Taber to prevent it from doing so.
If the Irredeemable shares are in Aviva's books at market value, then
Aviva and their Accountants recognize that market value prevails when
buying the shares back.
And clearly market value has to mean market value before the price
crashing statement - otherwise the directors would stand accused of
market price manipulation, which is a criminal offence.
Under IFRS accounting standards debt has to be accounted for at market value, therefore debt with a high fixed interest will have a high market value and if redeemed at par a profit has to be booked. As I say I'm not sure if exactly the same rules apply to preference shares.
As regards the company ridding themselves of high interest paying debt. The company chose to issue these Irredeemable preference shares at some point in the past, why didn't they issue 3% debt -- of course that was impossible at the time, why didn't they issue 9% convertible preference shares with a fixed term, that would have been better, but maybe impossible at the time. So they must now live with the consequences of their past actions or past circumstances and do the right thing by the preference shareholders.
ref. your point about borrowers buying their debt back at a discount - I am not sure that this is P&L neutral. If a company buys back $100 of debt and uses $95 to do this, there has to be a $5 balancing item, i.e. in the P&L - it is reported as being a non-operating item.
On the more general point about the redemption of the pref shares, I accept that they might be called irredeemable but what do the terms of the notes say? As an ordinary shareholder, I am all for Aviva trying to reduce its cost of capital. They are not a charity and why should an Aa3 rated corporate pay some 9% on debt in perpetuity.
i hope you are right, unfortunately the scenario reflects the current attitude of of those in power and Aviva promote we are there for you, my Aviva policies will be elsewhere on renewal.
The statement in the report with out clarification (which was no problem to Ecclesiastical} to date is morally wrong. no doubt a hand full of solicitors and barrister will be better off at the end of this
I am not a holder of Aviva prefs but do hold a chunk of Lloyds high coupon irredeemable prefs which have taken a knock today. Lloyds had the opportunity to seek redemption of the NCIPs alongside their ECNs a while back and IMO would have done so if legally possible. However, the term irredeemable is just that - cannot be legally redeemed without the prior consent of the stockholder.
To the best of my knowledge, preference shares may be cumulative or non cumulative ( indicating whether missed payments need to be repaid before recommencement of ordinary share dividends, and in either case must be resumed before ordinary share dividends), irredeemable or redeemable, and if so with a redemption date ( usually at
par), convertible (into equity at a predetermined rate which can change to maintain
the equity proportion in the event of equity dilution) or not, subordinated or not (indicating ranking of the stock in relation to other stocks in the event of the business going bust and in any case preference shares rank above ordinary shares). Each term has some financial impact on the value of the underlying stock. It is also my understanding that changes to any of these terms can only be made with the explicit consent of the individual holders of the stock - only likely if the terms are favourable to the holder.
In looking at the Aviva statement and comment in the annual results - the wording seems generic as to intent for all classes of preference holders, and if a holder of irredeemable preference shares I would ask for clarification from the company as to its specific position on their stock. The term irredeemable is incontrovertible, and IMO cannot be legally dismissed other than with the holder's consent.
I would imagine some young clever dick accountant sitting in a back office and wanting to make a name for himself dreamt this idea up. Not looking at the whole picture due to his youth and naivety. What about the institutional investors with these shares, they will be right peed off. Also the thousands of private investors who may even have these in there SIPP or ISA with Aviva, they will all be thinking twice when there insurance renewals come up.
The following are 2 statements on Aviva asset management site. Not really up to Aviva to cancel them without approval.
"The shares cannot be redeemed without approval by shareholders at an Extraordinary General Meeting."
"preference shares do not carry any voting rights and you are not normally entitled to attend the Companys general meetings, although you may attend and vote on any class meetings that may affect your rights as a preference shareholder. However, on a winding up, preference shares carry a preferential right of return of capital ahead of the ordinary shares."
Ecclesiastical who also have irredeemable prefs issued an RNS this morning putting the knife into Aviva over two lengthy paras. Followed by a one sentence statement saying they would not be following suit.
It would be funny if it were not so serious. And I suppose that is Ecclesiastical's point.
Am I dreaming we are talking about AVIVA!!!!!!!!!!!!!! YES one of the biggest insurance co in the world are they quoted on AIM? !!!!! NO in FTSE 100!! supposed upholders of savers, investors, &
shareholders of all companies not just their own some comments are missing the point the clue is
in the word irredeemable means never redeemable would they be offering to redeem @ 100 if price was 50p still shocked will have more to say later but we must contact all financial mags & all papers IC did tip aviva 8.375 & others some time back get iii & others brokers to protest & Mark Faber F.I. expert & our MPs
According to a post on another website, the term "perpetual" as it related to the Cumulative Irredeemable Preference shares was deleted from the Aviva website a couple of days ago. Not clear if this was before or after the announcement, but someone could rue the day that they thought that that might be an appropriate action.
To be fair to all investors Aviva should just buy the irredeemable preference shares in the market and then cancel them that way.
I'm not 100% sure on the accounting rules for preference shares but for debt carrying a high interest burden companies now have to account for that debt at market value, So buying in debt at market value and cancelling it would give no profit or loss. Conversely cancelling the debt at Par would give rise to a profit, so surely Aviva aren't going to cancel the Prefs and then claim they made a profit on the deal, those profits of course being my losses.
Hopefully the shareholders will stop the board cancelling the preference shares. All shareholders get a vote for this so pref holders will have a vested interest and it will make little difference to the ordinary shareholder.
When John Lewis did something similar they paid 150% for the 7.5% pref shares and only 100% for the 5%. This may well have had something to do with the respective values at the time.
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