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