Investkredit Bank AG

EANS-Adhoc: Investkredit Bank AG
ÖVAG and Investkredit announce repurchase of hybrid capital

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  ad-hoc disclosure transmitted by euro adhoc with the aim of a Europe-wide
  distribution. The issuer is solely responsible for the content of this
  announcement.
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22.05.2012

ÖSTERREICHISCHE VOLKSBANKEN-AKTIENGESELLSCHAFT AND INVESTKREDIT FUNDING LTD
ANNOUNCE A PROPOSED SCHEME OF ARRANGEMENT
NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO ANY PERSON RESIDENT AND/OR
LOCATED IN THE UNITED STATES OR TO ANY U.S. PERSON
Österreichische Volksbanken Aktiengesellschaft (ÖVAG) and Investkredit Funding
Ltd (the Issuer) hereby announce that the Issuer is proposing a scheme of
arrangement pursuant to Part 18A of the Companies (Jersey) Law 1991 in relation
to the EUR50,000,000 subordinated non-cumulative limited recourse notes (ISIN:
DE 0009576108 and WKN: 957 610) issued by the Issuer on 28 November 2002 (the
Bonds). The Issuer, with the consent of Investkredit Bank AG (Investkredit) and
ÖVAG, is proposing that the terms and conditions of the Bonds be amended as set
out below (the Scheme).
Today, the Austrian Financial Market Authority approved the implementation of
the Scheme.
Rationale for the Scheme
On 27 February 2012 Investkredit and ÖVAG announced their intention to merge
during the second half of 2012 (the Merger). ÖVAG will be the surviving legal
entity as a result of the Merger and the obligations of Investkredit under the
support undertaking between the Issuer and Investkredit dated 22 October 2002 in
respect of the Bonds will become obligations of ÖVAG by operation of Austrian
law.
At ÖVAG's annual general meeting on 26 April 2012, shareholders resolved to
write-off 70 per cent. of the nominal value of ÖVAG's issued share capital and
70 per cent. of its issued participation capital. The write-off equals an amount
of EUR 1,291 million on ÖVAG's share and participation capital following a loss
(annual result after taxes) in the amount of EUR 1,357 million for the year 2011
as recorded in ÖVAG's unconsolidated balance sheet as at 31 December 2011.
At the same time, shareholders resolved to increase ÖVAG's issued share capital
by EUR 484 million, of which EUR 250 million were subscribed by the Republic of
Austria and EUR 234 million by the Austrian Volksbanken cooperatives, who are
ÖVAG's principal shareholders. The Republic of Austria has also granted a surety
to protect certain assets of ÖVAG with a book value of EUR 100 million from
impairment (such surety arrangements and the subscription by the Republic of
Austria of shares in ÖVAG being the Government Support Package).
ÖVAG and Investkredit expect to announce on 29 May 2012 their respective
unaudited consolidated financial results as at and for the three month period
ended 31 March 2012. Such announcement will be made available on the Website.
As a consequence of the proposed Merger and the Government Support Package and
in the light of the changes to the capital requirements of banks that are
expected to be introduced by the new EU capital requirements directive (and
consequent regulations) in early 2013 (CRD4), each of Investkredit and ÖVAG have
been reviewing their respective capital requirements. They and the Issuer have
concluded that certain amendments to the terms and conditions of the Bonds would
be in the interests of the Issuer, the merged business of ÖVAG, its stakeholders
and Bondholders (that is, persons with a beneficial interest as principal in the
Bonds, held in global form through Clearstream Banking AG).
The terms and conditions of the Bonds contain provisions that require the Issuer
to make interest payments on the Bonds in certain circumstances including if
Investkredit or any of its subsidiaries (or following the Merger, ÖVAG or any of
its subsidiaries): (i) declares or pays any dividends or makes any other payment
or other distribution on any pari passu or junior ranking securities or (ii)
redeems, repurchases or otherwise acquires any pari passu or junior ranking
securities for any consideration other than conversion into or exchange for
shares of common stock of Investkredit (or following the Merger, of ÖVAG). 
ÖVAG believes that, particularly in the light of the Government Support Package,
such provisions in the terms and conditions of the Bonds are no longer
appropriate and may restrict the flexibility of ÖVAG to deal with its future
capital requirements in a manner which reflects its plans for the development of
its business and the introduction of CRD4. Accordingly, the Issuer, with the
consent of Investkredit and ÖVAG, is proposing that the terms and conditions of
the Bonds should be amended to remove the requirement to make interest payments
on the Bonds in the circumstances described in the previous paragraph. Such
changes, if implemented, would give the Issuer greater discretion in relation to
the payment of future interest payments on the Bonds, irrespective of whether
Investkredit or in respect of payments in 2013 and thereafter (and following the
Merger) ÖVAG or any of its subsidiaries is at the time paying dividends on its
ordinary share capital or dividends or interest on other junior securities or on
its parity securities, and whether or not it redeems or purchases such other
securities. 
In addition, the Issuer is proposing to change the terms and conditions of the
Bonds so as to grant to each Bondholder an option (the Put Option) to require
the Issuer to procure that ÖVAG purchases pursuant to the Deed of Undertaking
(as defined in the Explanatory Statement) all or some of the Bonds held by that
Bondholder at a price of EUR 392.50 per EUR 1,000 nominal amount of the Bonds
(the Optional Purchase Price). Accrued interest in respect of the Bonds will be
paid in addition to the payment of the Optional Purchase Price.
As part of these proposals, Bondholders are being offered an opportunity to exit
their investment at a premium to current market prices. The Bonds have no
maturity date and no dividend step-up or other similar economic incentive for
redemption by the Issuer. Neither ÖVAG, Investkredit nor the Issuer has any
present intention to redeem or purchase the Bonds, save pursuant to the Put
Option. Accordingly, there can be no assurance that Bonds that are not acquired
pursuant to the Put Option will in the future be redeemed by the Issuer or
otherwise be repurchased by ÖVAG or Investkredit.
Pursuant to the existing terms of the Bonds, future interest payments in respect
of any Bonds that are not purchased as part of the Put Option will be dependent
on, among other things, the future profitability and regulatory capital adequacy
of Investkredit or in respect of payments in 2013 and thereafter (and following
the Merger) of ÖVAG.
These proposed amendments are further described in detail in the Scheme, which
is set out in Part 5 of the explanatory statement relating to the Scheme (the
Explanatory Statement). 
ÖVAG has today made a substantially similar proposal to the holders of the
EUR250,000,000 fixed/floating rate non-cumulative non-voting preferred
securities issued by ÖVAG Finance (Jersey) Limited (ISIN: XS0201306288 and
Common Code: 020130628).
Approval of the Scheme
A meeting of Bondholders to consider the Scheme ordered by the Royal Court of
Jersey (the Court) is expected to be held on 15 June 2012 starting at 12:00 p.m.
CEST (the Meeting). The Meeting will be held at the offices of Freshfields
Bruckhaus Deringer LLP, Seilergasse 16, 1010 Vienna, Republic of Austria. 
In order to vote at the Meeting, Bondholders must arrange for a Direct
Participant Letter (as defined in the Explanatory Statement) to be completed and
sent to the Information Agent by the Direct Participant (as defined in the
Explanatory Statement) through which the Bondholder holds its Bonds no later
than 11:00 a.m. BST / 12:00 p.m. CEST on 12 June 2012. A copy of the Direct
Participant Letter may be downloaded from Investkredit's website at
www.volksbank.com/investkredit (the Website). Bondholders may also contact the
Information Agent on +49 69 1366 1254 if they wish to receive a paper or
electronic copy of the Explanatory Statement or the Direct Participant Letter.
If the Bondholders approve the Scheme at the Meeting, a hearing before the Court
is necessary in order to sanction the Scheme. All Bondholders are entitled to
attend the Court hearing in person or through counsel to support or oppose the
sanction of the Scheme. It is expected that the Court hearing to sanction the
Scheme will be held at 9:00 a.m. BST on 25 June 2012 at Royal Court House, The
Royal Square, St. Helier, Jersey, Channel Islands. Investkredit and/or the
Issuer will announce the exact date and time of such hearing by making an
announcement of such date and time by notice through Clearstream, a notifying
news service and on the Website at least two Business Days (as defined in the
Explanatory Statement) in advance of such hearing.
On the date the Scheme becomes effective or shortly thereafter, ÖVAG will pay to
Bondholders who voted at the Meeting (whether such Bondholders voted in favour
of or against the Scheme) EUR 7.50 per EUR 1,000 nominal amount of the Bonds
voted at the Meeting (the Scheme Implementation Fee). Payment of the Scheme
Implementation Fee is conditional on the Scheme becoming effective. The Scheme
Implementation Fee is separate from the Optional Purchase Price.
Following approval by Bondholders and sanctioning by the Court, the Scheme will
become effective and legally binding on the Issuer, all Bondholders,
Investkredit and ÖVAG on the date on which the order of the Court sanctioning
the Scheme under Article 125 of the Companies (Jersey) Law 1991 is delivered to
the Registrar of Companies in Jersey for registration, which is expected to be
27 June 2012.
Bondholders are advised to check with any bank, securities broker or other
intermediary through which they hold Bonds whether such intermediary must
receive instructions to participate in the Scheme before the deadlines specified
in the timeline below.
Expected Transaction Timeline
Event   Time and/or date
Voting Instruction Deadline     11:00 a.m. BST/12:00 p.m. CEST on 12 June 2012
Meeting of Bondholders  12:00 p.m. CEST on 15 June 2012

Court hearing to sanction the Scheme    9:00 a.m. BST on 25 June 2012
Effective Date  27 June 2012
Payment of Scheme Implementation Fee    27 June 2012
Exercise period of the Put Option       28 June 2012 to 4:00 p.m. BST / 5:00
p.m. CEST on 13 July 2012
Payment of the Optional Purchase Price  17 July 2012
For further information:
A complete description of the Scheme and the Explanatory Statement proposed by
the Issuer is available to be downloaded from the Website. A copy of the Scheme,
the Explanatory Statement and any further details about the transaction can be
obtained from:
The Information Agent:

Citigroup Global Markets Deutschland AG
Reuterweg 16
60323 Frankfurt
Germany
Phone: +49 69 1366 1254
Fax: +49 69 1366 1429
Email: frankfurt.tenderagent@citi.com
Attention of: Exchange Team
The Scheme Co-ordinators:
BNP Paribas
10 Harewood Avenue
London NW1 6AA
United Kingdom
Phone: +44 207 595 8668
Email: liability.management@bnpparibas.com   Citigroup Global Markets Limited
Citigroup Centre, Canada Square
Canary Wharf
London E14 5LB
United Kingdom
Phone: +44 (0) 20 7986 8969
Email: liabilitymanagement.europe@citi.com

Notice to US Bondholders:  The modification of the Bonds by the proposed
amendments to the terms and conditions of the Bonds pursuant to the Scheme may
be deemed an exchange of new securities under the US Securities Act of 1933, as
amended (the Securities Act), which may not be offered or sold in the United
States absent registration under the Securities Act or another exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act. The amendments to the terms and conditions of the Bonds have not
been and will not be registered under the Securities Act but will be effected in
reliance on the exemption provided by Section 3(a)(10) thereof.
The Scheme relates to the Bonds of a company incorporated under the laws of
Jersey and is to be made by means of a scheme of arrangement provided for under
the laws of Jersey. The Scheme will be subject to the disclosure requirements
and practices applicable in Jersey to a scheme of arrangement, which differs
from the disclosure and other requirements of US securities laws.
Neither of the Scheme Co-ordinators takes responsibility for the contents of
this announcement and none of ÖVAG, ÖVAG Finance (Jersey) Limited, the Scheme
Co-ordinators, the Information Agent or any of their respective directors,
employees or affiliates makes any representation or recommendation whatsoever
regarding the Scheme, or any recommendation as to whether Bondholders should
accept the proposals in the Scheme or vote on the Scheme. This announcement must
be read in conjunction with the Explanatory Statement. No invitation to acquire
any securities is being made pursuant to this announcement.  Any such invitation
is only being made in the Explanatory Statement and any such acquisition or
acceptance of offers to sell should be made solely on the basis of information
contained in the Explanatory Statement.  This announcement and the Explanatory
Statement contain important information which should be read carefully before
any decision is made with respect to the Scheme.  If any Bondholder is in any
doubt as to the action it should take, it is recommended to seek its own advice,
including as to any tax consequences, from its stockbroker, bank manager,
solicitor, accountant or other independent adviser.

The five biggest listed issues of Investkredit Bank AG
in terms of issue volume:

ISIN:
AT0000A0SNL2
AT0000A0SNJ6
AT0000A0SNG2
AT0000A0SNF4
AT0000A0SNH0

The issues of Investkredit Bank AG are admitted on the
following stock exchanges:

Second Regulated market of Wiener Börse AG
Official trading of Wiener Börse AG
Regulated market of the Luxembourg Stock Exchange
Open Market of Frankfurt Stock Exchange


Further inquiry note:
Investkredit Bank AG
Mag. Julius Wallner
Tel.: +43 0 50 4004 - 4211
mailto:julius.wallner@investkredit.at

end of announcement                               euro adhoc 
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issuer:      Investkredit Bank AG
             Kolingasse 14 - 16
             A-1090 Wien
phone:       +43 1 504004 - 4207
FAX:         +43 1 504004 84207
mail:     invest@investkredit.at
WWW:      www.investkredit.at
sector:      Banking
ISIN:        -
indexes:     
stockmarkets: stock market: Wien 
language:   English
 



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