GAM Star Credit Opps GBP Aviva pref shares update

by | Mar 12, 2018 | News

GAM Star Credit Opps GBP Aviva pref shares update

Further to our note last week (and this mainly is about the GBP fund as the impact in EUR fund and USD is less than 30bp in EUR and much less than that in USD fund).

The UK preference share market been marked down heavily, nevertheless most prefs are currently trading well above par.

As mentioned last week, if Aviva decided to cancel them at par the maximum impact from Wednesday prices (before the announcement) would be -2.27% on our fund. Please take note that Aviva have not yet done anything and that interest is continuing to accrue. Prices of Aviva/General Accident are trading within the 120 region and the price of most other of the prefs are way above par, between 130m and 160 so there is clearly still some uncertainty as to the final outcome both in Aviva and for the pref market as a whole.

While the prospectuses of many of the other UK preference shares have similar language to Aviva, these prospectuses were usually written in the 1990s and the language used was never understood to be supposed to be used for this purpose – but more for when a company had to return capital on liquidation. We understand how Aviva think they can do the cancellation, but many are questioning the ethical aspect of using the language or the meaning to justify such a procedure. Therefore it is unclear whether other companies will want to do the same with their prefs. We have contacted the investor relations of all the companies we own and, a number of them have come back to us saying they have not changed their view on the preference shares. Ecclesiastical has gone further and issued a public statement saying they have no plans to cancel their own preference shares through a reduction of capital at par like Aviva and took a swipe at Aviva by including a paragraph reminding Aviva of their published governance principles of building trust through being honest, etc. and hoping they would follow those principles. This does not mean they won’t in the future follow developments closely with Aviva and review possibilities. The Marc Taber FII twitter feed contains quite a bit of discussion from other parties for those who want more detail on the reaction of others in the market.

Some have asked if this is an opportunity. There is too much uncertainty for us to see it is an opportunity and at the right price levels we could even want to reduce our position for risk management purposes.

We will keep you updated with developments.


Twitter


Linkedin


Google-plus


Envelope

12 March 2018

More News & Views



ALL NEWS & VIEWS

© 2017 Atlanticomnium.

Authorised and regulated by Swiss Financial Market Supervisory Authority FINMA. Authorised and regulated by the Financial Conduct Authority FCA. The information and materials on this site do not constitute any form of advice. This website and all the information contained in it does not constitute a formal commitment by the company Atlanticomnium. Any form of reproduction, dissemination, copying, disclosure, modification, distribution and/or publication of this website and all the information in it is strictly prohibited. We decline all responsibility for any errors or omissions in the contents of this website and all the information contained in it which arise as a result of electronic transmission. If verification is required please request a hard-copy version. This website and all the information contained in it should not be construed as an invitation or offer to buy or sell any securities or related financial instruments.

  • Please read this important legal information before proceeding. Information contained herein are solely for the use of the person who has accessed this information and may not be reproduced or distributed, even partially, to any other person or entity. The material contained herein is confidential and intended solely for the use of the persons or entities with nationality of or respectively with their residence, domicile, registered office or effective administration in a State or Country in which distribution, publication, making available or use of the information is not contrary to applicable laws or any other regulation. The material contained herein is aimed at sophisticated, professional, eligible, institutional and/or qualified investors/intermediaries who have the knowledge and financial sophistication to understand and bear the risks associated with the investments described. The information is solely product-related and does not take into account any personal circumstances and does not qualify as general or personal investment recommendation or advice. In particular, the information is given by way of information only and does not constitute a specific legal offer for the purchase or sale of financial instruments. Moreover, nothing contained herein is constitutive of any tax advice. Every effort has been made to ensure the accuracy of the financial information herein but the information contained herein has not been independently reviewed or verified. Therefore, Atlanticomnium SA gives no assurance, express or implied, as to whether such information is accurate, true or complete and no responsibility is accepted by Atlanticomnium SA for any errors or omissions. Third-party content is the property of its respective provider or its licensor and is protected by applicable copyright law. Past performance is not indicative of future performance. The price of shares/units and the income from the funds/trusts can go down as well as up and may be affected by changes in rates of exchange or financial markets fluctuation, out of the scope of Atlanticomnium SA. To the fullest extent permitted by law, in no event shall Atlanticomnium SA or our affiliates, or any of our directors, employees, contractors, service providers or agents have any liability whatsoever to any person for any direct or indirect loss, liability, cost, claim, expense or damage of any kind, whether in contract or in tort, including negligence, or otherwise, arising out of or related to the use of the information provided.
    • AgreeCancel