A group of asset managers, including M&G Prudential, BlackRock and Invesco, have called on the government to close a legal loophole, which would have allowed insurance giant Aviva to redeem £450m of high-yielding preference shares without paying a premium.
Investor pressure in March forced Aviva to back down on the plans, which were driven by legal advice owing to regulatory requirements and would have seen the preference shares no longer count as regulatory capital in 2026.
In a letter to economic secretary John Glen, asset management groups M&G Prudential, Invesco, GAM, Blackrock, Edentree and Legal & General, representing a combined 29% stake in Aviva, demanded the Companies Act be changed to end uncertainty over the preference shares in circulation, according to The Times.
The letter, signed by M&G's head of corporate finance and stewardship Rupert Krefting, said: "Although Aviva has decided not to pursue its action to repay its preference shares at par, the issue has highlighted the legal uncertainty surrounding the rights of preference shareholders, and indeed other classes of shares, which are in a relative minority compared to ordinary shareholder."
Aviva scrapped the plan, which would have saved it £38m a year, despite previously stating its rights were "clear under the Companies Act".
In the wake of its initial announcement, nearly £700m was wiped off the value of sterling-denominated preference shares issued by several companies, according to The Times. Since then, Nationwide and Ecclesiastical, a specialist insurer of churches, have said that they will not cancel their preference shares, while Lloyds, Royal Bank of Scotland and Santander have not commented.
The investor groups' letter was also sent to FCA chief executive Andrew Bailey, and director of enforcement and market oversight Mark Steward.
The regulator is currently undergoing a review of the Aviva saga, and in a letter to Nicky Morgan MP, chair of the Treasury Select Committee, Bailey said it is the firm's "compliance with the Market Abuse Regulation that is forming the primary basis for the FCA's enquiries" into the company's planned share cancellation.
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