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