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AA Stock Exchange Protest

Monday, April 28, 2014

GMB “Atlas” Protest On Wednesday 30 April At London Stock Exchange Over Piling £4 Billion Debts Onto AA As Part Of Imminent Saga Float

After the SAGA float each AA patrol will carry £1.3m debts and interest of £53,000 per year which is reckless as already 46.6% of income is spent on servicing debts, taxes, profit etc leaving 53.4% to be spent on breakdowns says GMB.

GMB, the union for staff at roadside assistance AA, will hold a protest on Wednesday 30th April outside the London Stock Exchange. This is over the loading of £4bilion debts on the AA motoring organization when SAGA floats on the stock exchange. It is workers and customers who will have to service this debt mountain. An announcement is reported to be expected later this week.

After the SAGA float each patrol will be burdened with £1.3m debts requiring interest payments per patrol of at least £53,000 per year. This is nearly twice the average wage paid across the AA.

AA is now part of Acromas, owned by private equity companies Charterhouse, CVC Capital Partners and Permira. The owners plan to demerge AA from SAGA and float SAGA on the stock exchange. Some reports say float will be announced this week and that the business is valued at £1.75billion.  These private equity owners are planning to leave the AA to shoulder £4billion debts incurred mainly from the original purchases. See notes to editors for GMB analysis of prospectus issued by AA in Dublin in 2013 to raise up to £5 billion in loans.

AA employs 3,000 dedicated roadside patrols reaching an average of 10,000 breakdowns each day. AA employ a total of 8,049 in roadside assistance, offices and call centres.

The details of the protest are as follows:

From 11am 30th April

Outside London Stock Exchange

10 Paternoster Square,

London EC4M 7LS

Worker will wear AA high visibility yellow jackets and carry a large sphere, Atlas like, on their shoulders representing the weight of the world with the words “AA staff "breakdown" over £4billion debts". Other GMB members will be there with flags and placards.

There are plans for further demonstrations at AA offices in Newcastle upon Tyne, Oldbury, Cardiff, Melton Mowbray and Preston.

Paul Maloney, GMB Regional Secretary, said “GMB is targeting the London Stock Exchange because the AA owners plan to use the Exchange to float SAGA and dump massive debts onto the AA.

The private equity grandees who have asset stripped the AA plan to de-merge the AA and Saga. They intend to float Saga on the stock exchange and to take out a further £1.75billion and leave the AA saddled with over £4 billion of debt.

When this happens the private equity owners will have stripped a total of £4.25 billion from the two organizations since 2004.

Most of the current £4billion debt to be put on AA balance sheet is securitised against annual fees paid by AA’s motorist members for breakdown cover.

This is reckless. The AA accounts show that already nearly half the income in roadside assistance is spent on servicing debts, taxes, interest and profit etc leaving 53.4% to be spent helping with breakdowns. This leaves AA open to competition on price from other roadside recovery firms.

To add insult to injury AA  requires patrol staff  to work beyond their finish time on an almost daily basis to do “last job of shift” working over their allotted hours."


Contact:  Paul Grafton, GMB Organiser on 07714 239092 or 0208 397 8881 or GMB press office 07921 289880 or 07974 251 823.

Notes to editors

1 GMB analysis of main points in 442 page base prospectus issued by AA Bond Co Limited

(a public limited company incorporated in Jersey with registered no. 112992) for £5,000,000,000 Multicurrency Programme for the Issuance of Class A Notes.

Application will be made to the Irish Stock Exchange (the “Irish Stock Exchange”) for certain

Class A Notes issued under the Programme within 12 months of the date of this Base Prospectus to be admitted to the official list (the “Official List”) and trading on its regulated market (the “Main Securities Market”).

The AA

Debt and restructuring

·              £3.062 billion of existing debt refinanced, will see The AA become a Triple B rated investment-grade company

·              AA and Saga will split into two entities allowing Saga to pursue an IPO with relatively little debt (£1.5bn). This is reports this could be a £3bn floatation as early as the first quarter of 2014

·              Most of Acromas £4bn debt will be left in the AA

·              Refinancing consists of £1.9bn loan, £150m working capital facility and £220m, 364 day liquidity capital. As part of refinancing, £500m of class A bonds and £655m of class B secured bonds issued

·              The banks arranging the loan refinancing are Deutsche Bank, Royal Bank of Scotland, Bank of America, Bank of Tokyo-Mitsubishi UFJ, Barclays Bank, HSBC Bank, Lloyds TSB Bank, Royal Bank of Canada and UBS

·              The new senior term loan and class A and B notes will be used with £7.7m of available cash, to repay £2.038bn of the existing senior loans and to fully repay an expensive£ 934.4m mezzanine facility

·              After the refinancing, around £1.58bn of the existing senior term loan will remain in place, along with a £215m pound revolving credit facility

·              Timeline

·              2004: Centrica sold The AA to CVC Capital Partners and Permira for £1.75bn

·              In 2007, £2bn in dividends shared between the owners who managed the £6.15bn merger of the AA and Saga. It is understood Andrew Goodsell got £144m. Tim Parker made £40m from the deal.

Cost savings

‘We have implemented and intend to continue to implement initiatives to reduce our operating expenses. Cost control initiatives include headcount reductions, business process re-engineering and internal reorganisation, as well as other expense controls. For example, in December 2012, we closed our Basildon and Cardiff contact centres, the operations from which we redeployed within our existing Newcastle and Cheadle contact centres. While we aim to implement and maintain these cost savings and to pursue additional cost efficiencies, we may be unable to effectively control or reduce costs. Even if we are successful in these initiatives, we may face other risks associated with our plans, including declines in employee morale, the level of customer service we provide, the efficiency of our operations and the effectiveness of our internal controls.

The business

                All figures as of year ending 31 January 2013 unless otherwise stated

·              4 core segments – Roadside assistance, Insurance Services, Driving Services and AA Ireland

·              Approximately 16 million customers, representing around 51% of UK households, have subscribed to at least one AA product.

·              Trading turnover of £971.0m and Trading EBITDA of £394.6m, a 40.6% margin. 96.7% of total trading EBITDA is generated in the UK. Operating profit of £229.4m with an overall profit of £120.5m

·              Average number of employees for The Automobile Association Ltd during the year was 8,049 broken down by:

Road operations: 4,437 employees; Cheadle Call centre (roadside assistance): 927; Newcastle call centre (insurance services): 932; Database, management information and pricing: 48; Marketing: 243; Driving Services: 490; AA Ireland: 439; Head Office: 533. Wages and salaries were £155.6m and total staff costs including social security and pension costs were £190.9m. Accounts for AA Ltd state average number of staff is 8,702 with total staff costs of £296.5m (wages and salaries, £248.6m)

Roadside Assistance

·              Largest roadside assistance provider in the UK, representing over 40% of the market and responding to an average of approximately 10,000 breakdowns every day

·              3,000 dedicated patrols, reaching an average of 10,000 breakdowns each day. Patrols attended about 3.7 million breakdowns, with an average response time of approximately 45 minutes

·              Roadside assistance segment generated turnover of £674.1m, or 69.6% of total turnover, and Trading EBITDA of £317.6m, or 71.5% of total Trading EBITDA (excluding head office costs)

·              12.7 million roadside assistance personal members and B2B customers, consisting of 4 million personal members and 8.7 million B2B customers.

·              4,437 employees

Insurance Services

·              Leading insurance brokers in the UK, with approximately 700,000 motor insurance policies and approximately 900,000 home insurance policies

·              Home emergency service has approximately 1.2 million covered homes including B2B customers

·              Insurance services segment generated turnover of £162.1m, or 16.7% of total turnover, and Trading EBITDA of £93.1m, or 21.0% of total Trading EBITDA (excluding head office costs)

Driving Services

·              Largest driving school in the United Kingdom based on market share with approximately 2,900 franchised instructors, about twice the size of the second largest driving school in the country. Services offered through the AA brand and through BSM.

·              Driving services segment generated turnover of £96.5m, or 10% of total turnover, and Trading EBITDA of £19.6m, or 4.4% of total Trading EBITDA (excluding head office costs)

AA Ireland

·              Leading provider of roadside assistance and insurance broking in Ireland with approximately 111,000 roadside assistance personal members and approximately 160,000 B2B customers, as well as approximately 108,000 motor insurance customers and approximately 65,000 home insurance customers

·              This segment generated turnover of £38.3m, or 4.0% of our total turnover, and Trading EBITDA of £13.0m, or 2.9% of total Trading EBITDA (excluding head office costs)

·              In addition to 4 core segments, historically they engaged in reinsurance underwriting through Acromas Reinsurance Company Ltd

·              The 10 largest Business to Business partners (B2B), mainly in the roadside assistance segment, accounted for 13.2% of total turnover, of which the biggest, Lloyds Banking Group, accounted for 9.3% of total turnover. Contract with Lloyds due for renewal in March 2014. Other B2B partners include Chevrolet, Ford, General Motors, Honda, Jaguar/Land Rover, Toyota, BT Fleet, Enterprise, GE Capital and Hertz

·              Funds controlled by Charterhouse, CVC and Permira indirectly own 36%, 20% and 20% respectively of the AA’s shares. Employees own 20% leaving others with 4%.

·              AA UK Pension scheme had a funding deficit of £87m and assets of £1,222m as of 31 March 2010.

·              Directors


Andrew Goodsell




Andrew Strong




Andy Boland




Jonathan Keighley


Independent director, co-founder and current executive chairman of Structured Finance Management Ltd


James Arnell


Director, Charterhouse man having worked on deals including Cegelec, PHS, TDF, Saga, Acromas, Elior, TSL, Lucite and Fives. Barrister


Pev Hooper


Director, CVC Partner. Responsible for investments in Merlin Entertainments, Acromas and Virgin Active


Stuart Howard




Philip Muelder


Director, Permira Partner, worked on Just Retirement, the UK’s leading enhanced annuities retirement specialist

In the year ending January 2013, 8 directors (A Strong, A Boland, M Cutbill, S Dewey, S Douglas, J Austin, A Gisby and D Wallace) total emoluments amounted to £2,434,000. J Goodsell and S Howard are remunerated by Sage Group Ltd and received total remuneration for the year of £2.4m.

Bond holders include the following funds:

·              Aviva Inv High Yield Bond Class 1 Income

·              Ignis Corporate Bond Acc

·              Ivy High Income Fund

·              Pru Life Kames Investment Grade Bond S5

·              Kames Ethical Corporate Bond B Fund Acc

·              Newton Offshire Strategy Fund Sterling Fixed Interest

·              Legal & General Life Kames Ethical Corporate Bond Fund

·              iShares Global ex USD High Yield Corporate Bond ETF

·              Kames Sterling Corporate Bond A Inc

·              JRS Luxembourg UCITS

·              Ivy High Income Opportunities Fund

·              Invesco Leveraged High Yield Fund Ltd

·              Threadneedle Credit Opportunities Fund

·              Western Asset High Yield Defined Opportunity Fund Inc

·              Barclays Sterling Corporate Bond UCITS ETF

Risks in relation to the Pension Scheme

One of the risk factors listed is that in certain circumstances the AA UK pension scheme may need to be fully funded which would have an adverse impact on the business and operations. The deficit on a buy-out basis is often significantly more than the funding deficit which was £724m as of 31 March 2010. Under certain circumstances the AA Group could also be responsible for the pension liabilities of the Saga Group which, as of 31 January 2012, had an estimated funding deficit of £37.3m.

Any risk factors identified by the management of the company which make an offering speculative or risky must be disclosed.

Risks in relation to Security, Enforcement and Insolvency

AA Limited is an ‘obliger’ to a Saga Group senior term and revolving facilities agreement from September 2007. This would make AA Limited contractually bound to make repayments on outstanding debt if Saga were to default.

Payments to Group Treasury

Historically, all surplus cash has been transferred to the Acromas Group Treasury. Following the separation the cash will be retained within the AA Group. In the 3 months ending 30 April 2013 the payment was £79m, up from £69.2m for the equivalent 3 months in 2012. The last 3 years payments to group treasury are set out below:

year ending 31 January

(£ in millions)







Steve Dewey:

Director of:

·              Automobile Association Developments Ltd

·              The Automobile Association Ltd

·              AA Pensions Trustees Ltd

·              Ben Motor & Allied Trades Benevolent Fund (Charity)

Also director of French registered ACTA Assistance, a company which provides roadside assistance to certain members while travelling in some European countries.

Share Capital

The issuer is AA Bond Co Ltd, a public limited company incorporated in Jersey. The shares are 100% owned by the Holdco, AA Intermediate Co Ltd, a private company incorporated in England. AA Intermediate Co Ltd shares are 100% owned by the Topco, AA Mid Co Ltd, a limited liability company registered in England and Wales. All shares in AA Mid Co Ltd are held by AA Ltd.

2 GMB analysis of data from 2013 accounts £m



Roadside turnover



Trading EBITDA



Operating profit





Money spent on motoring services



Money spent on servicing debts, taxes, interest and profit etc





AA Roadside services total turnover year ending 31 January 2013









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