Aviva and Paragon Bank alternative funding

I was positioning myself to buy some Aviva 6.125pct 2036 at around 120 and Paragon 6.125 pct 2022 at around106 then saw announcements/speculation that both are looking to possibly/almost certainly re-finance ' expensive bonds' via other means/share buy backs and from internal banking ( from Paragon through their bank ). To date i have only bought ORB securities at issue and not so far dabbled in the second hand after market so the question is should i be highly concerned by these announcements or will things work their way through and have no major concerns. My fear is with both trading at a premium a capital loss could be a possibility given both trade above par. The YTM of around 4.50 pct for both companies could be wiped out in a flash if they are redeemed early an at par. Interestingly neither security has had any real price reaction today so maybe i am missing the point somewhere. ?
Any comments welcome and i know Tesco recently did something similar so guess that should be a lead-did investors lose out if they bought in the after market at a premium. ?
Thanks in advance to all who take their time to reply.

Comments

  • Sussexmade,
    Note the min Qty of 10K, plus the reset of coupon in 2026
    I suspect Aviva may offer a tender to encourage investors to sell.
    Both Tesco & Nationwide have tendered their debt in the past
    If you don't accept their tender offer (current price plus a small premium?), then I suspect they will mature in 2036 at par, however read the prospectus!
    If there is a large take up of the tender, then Liquidity may become a problem for those who continue to hold the security

    Copied from Prospectus
    "Reset Rate of Interest
    From (and including) 16 November 2026, the rate of interest payable on the Notes in respect of each
    Interest Calculation Period (the "Reset Rate of Interest") will be the rate per annum which is the aggregate
    of 2.85 per cent. and the Gross Redemption Yield of the Benchmark Gilt in respect of such Interest
    Calculation Period with the price of the Benchmark Gilt for this purpose being the arithmetic average
    (rounded up (if necessary) to four decimal places) of the bid and offered prices of such Benchmark Gilt
    quoted by the Reference Market Makers at 3.00 p.m. (London time) on the relevant Determination Date
    on a dealing basis for settlement on the next following dealing day in London. "

    Not for the average amateur investor?
    The Aviva preference shares might be a better investment (AV.A).
    Current yield around 5%
  • Thanks Shaunm for your time on this, i will have a good look through the prospectus of both in the next few hours but being ' johnnie few mates' until 2036 with Aviva doesn't look very attractive. ! Paragon may be a better bet given the smaller premium but neither look so enticing now. Oh well just hope there will be another new issue soon that pays a minimum of 4.5 pct. I still don't understand why neither have re-acted negatively particularly Aviva given its lifespan. Yep maybe time to look at the prefs.
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