Österreichische Volksbanken-Aktiengesellschaft

EANS-Adhoc: Österreichische Volksbanken-Aktiengesellschaft
ÖVAG announces repurchase of hybride 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 ÖVAG FINANCE (JERSEY) LIMITED
ANNOUNCE AN INVITATION FOR OFFERS TO SELL PREFERRED SECURITIES AND SOLICITATION
OF CONSENTS

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 ÖVAG Finance
(Jersey) Limited hereby announce that ÖVAG is inviting 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) (the "Preferred Securities") to offer to sell any and
all of their Preferred Securities to ÖVAG for cash (the "Invitation") and to
consent to the Proposals (as defined in the Invitation Memorandum dated 22 May
2012 (the "Invitation Memorandum")).
The Proposals are set out in, and the Invitation is made on the terms and
subject to the conditions contained in, the Invitation Memorandum. Today, the
Austrian Financial Market Authority approved the purchase of the Preferred
Securities. The Netherlands Authority for the Financial Markets (AFM) has on 22
May 2012, pursuant to article 5:81 (3) of the Netherlands Financial Supervision
Act (Wet op het financieel toezicht), granted dispensation to ÖVAG to proceed
with the Invitation. This dispensation has several conditions attached to it,
including that no purchase of Preferred Securities be made directly or
indirectly by ÖVAG, at a better price or on better terms than those upon which
the Invitation is being made, during the 12 month period commencing on the date
of the Invitation Memorandum.

Capitalised terms used in this announcement have the meanings ascribed to them
in the Invitation Memorandum.  
Preferred Securities    Aggregate Outstanding Amount    Clearing Codes  Consent
Payment Purchase Price
                                

EUR250,000,000 Fixed/Floating Rate Non-cumulative Non-voting Preferred
Securities issued by ÖVAG Finance (Jersey) Limited       EUR250,000,000  WKN:
A0DC0M
ISIN: XS0201306288
Common Code: 020130628

Dutch Security Code: 14963      EUR10 per EUR1,000 liquidation preference      
EUR390 per EUR1,000 liquidation preference



Rationale for the Invitation and Proposals
The Invitation for offers to sell Preferred Securities to ÖVAG for cash is part
of ÖVAG's ongoing capital management and based on an agreement with the Republic
of Austria. The aim of the Invitation is to enhance ÖVAG's capital position by
increasing common equity. ÖVAG intends to sell or transfer the Preferred
Securities purchased by ÖVAG to ÖVAG Finance for cancellation.

On 27 February 2012 ÖVAG and Investkredit Bank AG ("Investkredit") announced
their intention to merge during the second half of 2012 (the "Merger").  ÖVAG
will be the surviving legal entity following the Merger.
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 EUR1,291 million on ÖVAG's share and participation capital following a loss
(annual result after taxes) in the amount of EUR1,357 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 EUR484 million, of which EUR250 million was subscribed by the Republic of
Austria and EUR234 million by the Austrian Volksbanken, 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 EUR100 million from impairment (such
surety arrangements and the subscription by the Republic of Austria of shares in
ÖVAG being the "Government Support Package").
ÖVAG expects to announce on 29 May 2012 its unaudited consolidated financial
results as at and for the three-month period ended 31 March 2012. Such
announcement will be made available on ÖVAG's website.
As a consequence of the 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"), ÖVAG has been reviewing its capital
requirements. It has concluded that certain amendments to the terms and
conditions of the Support Agreement and the Statement of Rights relating to the
Preferred Securities would be in the interests of the merged business of ÖVAG
and its stakeholders.
The Support Agreement contains provisions which (in summary) restrict ÖVAG from
(i) paying dividends on its ordinary shares (and certain other securities); (ii)
paying any distribution or dividends on Dividend Parity Securities (as defined
in the Support Agreement); and (iii) subject to certain exceptions, redeeming,
purchasing or otherwise acquiring any Dividend Parity Securities or its ordinary
shares (or certain other securities) in each case if any dividend on the
Preferred Securities has not been paid to Holders, until ÖVAG Finance has
resumed paying dividends on the Preferred Securities.
ÖVAG believes that, particularly in the light of the Government Support Package,
such provisions 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, ÖVAG is proposing that the Support Agreement should be amended to
remove the restrictions described in the previous paragraph and the Statement of
Rights of the Preferred Securities should be amended in order to conform
relevant definitions. Such changes, if implemented, would mean that ÖVAG has
greater discretion whether or not to make future dividend payments on its
ordinary share capital or to pay dividends or interest on other junior
securities or on its parity securities and to redeem or purchase any such
securities, even if at the time it is not paying dividends on the Preferred
Securities.  The full text of the provisions which (i) are proposed to be
deleted from the Support Agreement and (ii) will approve the amendment of the
Statement of Rights, are set out in the Extraordinary Resolution.
As part of these proposals ÖVAG is offering Holders an opportunity to exit their
investment at a premium to current market prices. The Preferred Securities have
no maturity date and no dividend step-up or other similar economic incentive for
redemption by ÖVAG Finance.  Neither ÖVAG nor ÖVAG Finance has any present
intention to redeem or purchase the Preferred Securities, save pursuant to the
Invitation.  Accordingly, there can be no assurance that Preferred Securities
that are not acquired by ÖVAG pursuant to the Invitation will in the future be
redeemed by ÖVAG finance or otherwise be repurchased by ÖVAG.
Dividends in respect of the Preferred Securities have been deferred on a
non-cumulative basis since 2010.  Pursuant to the existing terms of the
Preferred Securities, future dividend payments in respect of any Preferred
Securities that are not purchased as part of the Invitation will be dependent
on, among other things, the future profitability and regulatory capital adequacy
of ÖVAG.
ÖVAG has today made a substantially similar proposal (by way of a scheme of
arrangement) to the holders of the outstanding EUR 50,000,000 subordinated
non-cumulative limited recourse notes of Investkredit Funding Ltd which have the
benefit of a support undertaking of Investkredit.  When the Merger is
implemented, the obligations of Investkredit under such support undertaking
will, by operation of law, become obligations of ÖVAG.
Purchase Price to be Received for the Preferred Securities
ÖVAG proposes to accept for purchase any and all of the Preferred Securities on
the terms and subject to the conditions contained in the Invitation Memorandum.
Holders who have validly submitted an Electronic Order prior to the Expiration
Time and whose offers to sell are accepted by ÖVAG will receive EUR390 per
EUR1,000 liquidation preference of the Preferred Securities (the "Purchase
Price") in immediately available funds in cash on the Settlement Date. Accrued
dividends in respect of the Preferred Securities will not be payable as part of
the Purchase Price. For the avoidance of doubt, Holders who have submitted an
Electronic Order prior to the Expiration Time and whose offers to sell are
accepted by ÖVAG will also, subject to satisfaction of the Consent Payment
Conditions, receive the Consent Payment (as set out below).
Proposals
In order to amend the terms of the Support Agreement and approve the amendment
of the Statement of Rights, a meeting of the Holders of the Preferred Securities
has been convened to consider and, if thought fit, pass the Extraordinary
Resolution which, subject to certain conditions set out therein, will (a) amend
the Support Agreement and approve the amendment of the Statement of Rights; and
(b) authorise ÖVAG and ÖVAG Finance to execute the Supplemental Support
Agreement to effect the amendments to the Support Agreement referred to in (a)
above, all as more fully described in the Extraordinary Resolution.
Holders who have submitted a valid Electronic Order or Consent Instruction (each
of which includes an automatic instruction to the Registered Holder to instruct
the Tender and Consent Agent (or its nominee) to attend the Meeting and vote in
favour of the Extraordinary Resolution) to the Tender and Consent Agent before
the Expiration Time (that is not withdrawn before the Expiration Time or
otherwise in the limited circumstances in which withdrawal is allowed) will be
eligible to receive, subject to satisfaction of the Consent Payment Conditions,
EUR10 per EUR1,000 liquidation preference of the Preferred Securities
represented by the relevant Consent Instruction or Electronic Order (the
"Consent Payment") in immediately available funds in cash on the Settlement
Date.
The Consent Payment is separate from and independent to any Purchase Price
payable to a Holder whose Preferred Securities are accepted for purchase
pursuant to the Invitation.
Holders to whom the Invitation is not being made pursuant to the offer
restrictions set out in the Invitation Memorandum may also be eligible, to the
extent permitted by applicable laws and regulations and subject to satisfaction
of the Consent Payment Conditions, to receive an identical amount to the Consent
Payment by delivering, or arranging to have delivered on their behalf, a valid
Ineligible Holder Instruction (which includes an automatic instruction to the
Registered Holder to instruct the Tender and Consent Agent (or its nominee) to
attend the Meeting and vote in favour of the Extraordinary Resolution) that is
received by the Tender and Consent Agent before the Expiration Time and not
withdrawn.
ÖVAG reserves the right in its absolute discretion to withdraw the Proposals at
any time before the Meeting (or any adjourned Meeting) or to refrain from
entering into the Supplemental Support Agreement even if the Extraordinary
Resolution is passed. In the event the Proposals are withdrawn, the Meeting will
still be held, but ÖVAG will be under no obligation to enter into the
Supplemental Support Agreement to give effect to the amendments to the Support
Agreement contained in the Extraordinary Resolution or to pass the resolution of
ÖVAG Finance, as a shareholder of ÖVAG Finance, to make the amendments to the
Statement of Rights.
Participating in the Invitation or the Proposals
To offer to sell Preferred Securities pursuant to the Invitation or to be
eligible to receive the Consent Payment, a Holder should deliver, or arrange to
have delivered on its behalf, through the relevant Clearing System and in
accordance with the requirements of such Clearing System, a valid Electronic
Order, Consent Instruction or Ineligible Holder Instruction, as applicable, that
is received by the Tender and Consent Agent by the Expiration Time.
Holders are advised to check with any bank, securities broker or other
intermediary through which they hold Preferred Securities whether such
intermediary must receive instructions to participate in the Proposals and the
Invitation before the deadlines specified in the timeline below.
Expected Transaction Timeline
Date    Event
22 May 2012     Commencement of the Invitation and distribution of the
Invitation Memorandum.

        Notification of the Meeting will be made to (i) Holders in accordance
with the Statement of Rights and (ii) Euronext Amsterdam and the Luxembourg
Stock Exchange in accordance with the requirements thereof.
5 p.m., CET, 11 June 2012 ("Expiration Time")   The Invitation expires unless
ÖVAG extends or terminates it prior to the Expiration Time in its sole
discretion: deadline for receipt by the Tender and Consent Agent of Electronic
Orders, Consent Instructions or Ineligible Holder Instructions. 
        After this time, an Electronic Order, a Consent Instruction or an
Ineligible Holder Instruction may only be withdrawn in the limited circumstances
set out herein.
12 noon, CET, 12 June 2012      Voting deadline.  
Last date for Holders to instruct the Registered Holder to appoint the Tender
and Consent Agent as its proxy to attend the Meeting and vote in favour of or
against the Extraordinary Resolution in accordance with the Voting Rights,
subject to in each case the rights of ÖVAG to re open, extend, amend and/or
withdraw the Invitation.
12 noon, CET, 15 June 2012      Date and time of Meeting of the Holders.  Notice
of the outcome of the Meeting will be given to Holders as soon as possible
thereafter via the Clearing Systems.*
15 June 2012    Announcement by ÖVAG of (i) whether it accepts offers to sell;
(ii) the aggregate liquidation preference of Preferred Securities accepted for
purchase (which may be zero); and (iii) the aggregate liquidation preference of
the Preferred Securities remaining outstanding following completion of the
Invitation.
16 June 2012 - 14 July 2012     Companies Law Article 53 Application Period.

17 July 2012 ("Settlement Date")        Expected Settlement Date.
If ÖVAG has accepted offers to sell Preferred Securities, the Purchase Price
will be paid.
If the Consent Payment Conditions are satisfied, the Consent Payment and
Ineligible Holder Amount will be paid.
* If the Meeting is not quorate on the date stated above, such Meeting shall
stand adjourned for such period and to such place as the chairman of the Meeting
in his discretion shall determine and, in the event that such Meeting is
adjourned, ÖVAG may elect (in its sole and absolute discretion) to re-open the
Invitation and/or extend the voting deadline.
For further information:
A complete description of the terms and conditions of the Proposals and the
Invitation is set out in the Invitation Memorandum.  Further details about the
transaction can be obtained from:
DEALER MANAGERS
BNP Paribas
10 Harewood Avenue
London NW1 6AA
United Kingdom

Tel:  +44 207 595 8668
Email: liability.management@bnpparibas.com
        Citigroup Global Markets Limited
Citigroup Centre, Canada Square
Canary Wharf
London E14 5LB
United Kingdom
Tel: +44 (0) 20 7986 8969
Email:  liabilitymanagement.europe@citi.com

TENDER AND CONSENT AGENT
Citibank, N.A., London Branch
Citigroup Centre, Canada Square
Canary Wharf
London E14 5LB
United Kingdom

Telephone: +44 20 7508 3867
Fax: +44 20 3320 2405
Email: exchange.gats@citi.com

A copy of the Invitation Memorandum is available to eligible persons upon
request from the Tender and Consent Agent.
Neither of the Dealer Managers takes responsibility for the contents of this
announcement and none of ÖVAG, ÖVAG Finance, the Dealer Managers, the Tender and
Consent Agent or any of their respective directors, employees or affiliates
makes any representation or recommendation whatsoever regarding the Invitation,
or any recommendation as to whether Holders should tender Preferred Securities
in the Invitation or vote on the Proposals. This announcement must be read in
conjunction with the Invitation Memorandum.  No Invitation to acquire any
Preferred Securities is being made pursuant to this announcement.  Any such
Invitation is only being made in the Invitation Memorandum and any such
acquisition or acceptance of offers to sell should be made solely on the basis
of information contained in the Invitation Memorandum.  This announcement and
the Invitation Memorandum contain important information which should be read
carefully before any decision is made with respect to the Invitation or the
Proposals.  If any Holder 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.
This press release concerns regulated information (gereglementeerde informatie)
in the meaning of the Dutch Financial Supervision Act (Wet op het financieel
toezicht).
Jurisdictional Restrictions
General
Neither this announcement nor the Invitation Memorandum constitute an offer to
purchase Preferred Securities.  Neither this announcement nor the Invitation
Memorandum constitute a solicitation of an offer to sell Preferred Securities in
any jurisdiction in which such solicitation or offer is unlawful, and offers to
sell will not be accepted from Holders located or resident in any jurisdiction
in which such solicitation or offer is unlawful.  In those jurisdictions where
the securities or other laws require the Invitation to be made by a licensed
broker or dealer, any actions in connection with the Invitation shall be deemed
to be made on behalf of ÖVAG by the Dealer Managers or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
The distribution of the Invitation Memorandum in certain jurisdictions is
restricted by law.  Persons into whose possession the Invitation Memorandum
comes are required by ÖVAG, ÖVAG Finance, the Dealer Managers and the Tender and
Consent Agent to inform themselves about, and to observe, any such restrictions.
Holders and Registered Holders with any questions on the Proposals or Invitation
should contact the Dealer Managers for further information.
United States
The Invitation is not being made and will not be made, directly or indirectly,
in or into, or by use of the mails of, or by any means or instrumentality
(including, without limitation, facsimile transmission, telex, telephone, email
and other forms of electronic transmission) of interstate or foreign commerce
of, or any facility of a national securities exchange of, the United States, and
no offer to sell Preferred Securities may be made by any such use, means,
instrumentality or facility from or within the United States, or by any U.S.
Person (as defined in Regulation S of the United States Securities Act of 1933,
as amended (each a "U.S. Person")) or by persons located or resident in the
United States. Accordingly, copies of the Invitation Memorandum and any other
documents or materials relating to the Invitation are not being, and must not
be, directly or indirectly, mailed or otherwise transmitted, distributed or
forwarded in or into the United States, or to U.S. Persons or to persons located
or resident in the United States. Any purported offer to sell Preferred
Securities resulting directly or indirectly from a violation of these
restrictions will be invalid and offers to sell Preferred Securities made by a
U.S. Person, by any person acting for the account or benefit of a U.S. Person,
or by a person located or resident in the United States or any agent, fiduciary
or other intermediary acting on a non-discretionary basis for a principal
located or resident in the United States will not be accepted. For the purposes
of this paragraph, United States means the United States of America, its
territories and possessions (including Puerto Rico, the U.S. Virgin Islands,
Guam, American Samoa, Wake Island and the Northern Mariana Islands), any state
of the United States of America and the District of Columbia.
Italy
None of the Invitation, the Invitation Memorandum or any other documents or
materials relating to the Invitation have been or will be submitted to the
clearance procedure of the Commissione Nazionale per le Società e la Borsa
(CONSOB).  The Invitation is being carried out in the Republic of Italy (Italy)
as an exempted offer pursuant to article 101-bis, paragraph 3-bis of the
Legislative Decree No. 58 of 24 February 1998, as amended (the Financial
Services Act) and article 35-bis, paragraph 3, of CONSOB Regulation No. 11971 of
14 May 1999, as amended ("CONSOB Regulation").  Holders can offer the Preferred
Securities through authorised persons (such as investment firms, banks or
financial intermediaries permitted to conduct such activities in Italy in
accordance with the Financial Services Act, CONSOB Regulation No. 16190 of 29
October 2007, as amended from time to time, and Legislative Decree No. 385 of
September 1, 1993, as amended) and in compliance with applicable laws and
regulations or with requirements imposed by CONSOB or any other Italian
authority.
United Kingdom
The communication of the Invitation Memorandum and any other documents or
materials relating to the Invitation are not being made and such documents
and/or materials have not been approved by an authorised person for the purposes
of section 21 of the Financial Services and Markets Act 2000. Accordingly, such
documents and/or materials are not being distributed to, and must not be passed
on to, the general public in the United Kingdom, and are only for circulation to
persons outside the United Kingdom or to persons within the United Kingdom
falling within Article 43 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the "Order"), or to other persons to whom it
may lawfully be communicated in accordance with the Order.
Belgium
The Invitation Memorandum is not addressed to, and may not be accepted by, any
Holder or Registered Holder who is resident in Belgium and is not a qualified
investor (investisseur qualifié/gekwalificeerde belegger) as defined pursuant to
Article 10 of the Belgian law of 16 June 2006 on public offerings of investment
instruments and the admission of investment instruments to trading on regulated
markets.
France
Neither the Invitation Memorandum, nor any other offering material or
information relating to the Invitation, has been submitted for clearance to the
Autorité des Marchés Financiers and they may not be released, issued, or
distributed or caused to be released, issued, or distributed, directly or
indirectly, to the public in the French Republic, except to (i) providers of
investment services relating to portfolio management for the account of third
parties and/or (ii) qualified investors (investisseurs qualifiés), other than
individuals, all as defined in, and in accordance with, Articles L.411-1,
L.411-2 and D.411-1 to D.411-3 of the French Code Monétaire et Financier.
General
Neither the Invitation Memorandum nor the electronic transmission thereof
constitutes an offer to buy or the solicitation of an offer to sell the
Preferred Securities (and any offer to sell the Preferred Securities pursuant to
the Invitation will not be accepted from Holders) in any circumstances in which
such offer or solicitation is unlawful.  In those jurisdictions where the
securities, blue sky or other laws require the Invitation to be made by a
licensed broker or dealer and the Dealer Managers or any of its affiliates is
such a licensed broker or dealer in any such jurisdiction, such Invitation shall
be deemed to be made by the Dealer Managers or such affiliate, as the case may
be, on behalf of ÖVAG in such jurisdiction. ÖVAG may accept offers to sell made
by a Holder if such acceptance will not result in a breach of any applicable
laws, rules or regulations.
In addition to the representations referred to above in respect of the United
States, each Holder participating in the Invitation will be deemed to give
certain representations in respect of the other jurisdictions referred to above
and generally as set out in the Invitation Memorandum.  Any offer to sell
Preferred Securities made by a Holder that is unable to make these
representations will not be accepted.
In the case of the Proposals, each Holder participating in the Proposals as an
Ineligible Holder will also be deemed to give certain representations as to that
Holder's status as an Ineligible Holder, and to give certain other
representations as set out in the Invitation Memorandum in respect of any
submission of an Ineligible Holder Instruction in favour of the Proposals.  Each
of ÖVAG, ÖVAG Finance, the Dealer Managers and the Tender and Consent Agent
reserves the right, in its sole and absolute discretion, to investigate, in
relation to any offer to sell Preferred Securities or submission of an
Ineligible Holder Instruction in favour of the Proposals, whether any such
representation given by a Holder is correct and, if such investigation is
undertaken and as a result ÖVAG determines (for any reason) that such
representation is not correct, such offer to sell may be rejected.

Stock exchange listed issues of participation capital issued by Österreichische
Volksbanken-Aktiengesellschaft:

ISIN:
AT0000755665 Österreichische Volksbanken-AG Partizipationsscheine 
XS0359924643 EUR 500,000,000 Perpetual Non Cumulative Participation Capital
Certificates 

The five biggest listed issues of Österreichische Volksbanken-Aktiengesellschaft
in terms of issue volume:

ISIN:                   
XS0451759012 
XS0417722393 
AT000B053442 
XS0275528627
AT000B061437

The issues of Österreichische Volksbanken-Aktiengesellschaft are admitted on the
following stock exchanges:

Second Regulated market of Wiener Börse AG
Official trading of Wiener Börse AG
Regulated market of Baden-Württembergische Wertpapierbörse
Regulated market of the Prague Stock Exchange
Regulated market of the Luxembourg Stock Exchange
Open Market of Berlin Stock Exchange
Open Market of Stuttgart Stock Exchange
Open Market of Frankfurt Stock Exchange


Further inquiry note:
Walter Gröblinger
Tel.: +43/ (0) 50 4004-0
E-Mail: walter.groeblinger@volksbank.com

end of announcement                               euro adhoc 
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issuer:      Österreichische Volksbanken-Aktiengesellschaft
             Kolingasse  19
             A-1090 Wien
phone:       +43 0 50 4004-0
WWW:      www.volksbank.com
sector:      Banking
ISIN:        AT0000755665
indexes:     Standard Market Auction
stockmarkets: Regulated free trade: Wien, stock market: Prague Stock Exchange 
language:   English
 



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