Raiffeisen International Bank-Holding AG decided to strengthen its core capital by EUR 1.25 billion today. The capital increase will be carried out in the form of two issuances, of which one is EUR 600 million in participation rights (Genussrechte), and the other EUR 650 million in hybrid Tier 1 capital. Both of these will be fully subscribed by Raiffeisen Zentralbank Osterreich AG.
The issuance of participation rights with equity characteristic will be carried out based on the approval of the Annual General Meeting in June 2009 related to the issuance of participation rights and according to § 174 AktG under the exclusion of subscription rights of the shareholder. Participation rights capital is perpetual (i.e. no fixed maturity), carrying a call option (i.e. right to early redemption) of the issuer, whereby there are economic arguments for the issuer for an early redemption as the participation rights dividend would increase. The participation rights dividend would amount to 10 percent p.a. in the first five years and would thereafter progressively increase. The participation rights dividend becomes payable at the same time as the dividend that is allocated to Raiffeisen International shares. In the event that dividends are suspended, there is no requirement to pay non-distributable participation right dividends at a later date (non-cumulative). As is the case with the share capital, the participation rights capital participates up to the full nominal amount in an eventual corporate legal loss made by Raiffeisen International.
Furthermore, the Board of Management of Raiffeisen International decided to issue EUR 650 million in perpetual hybrid Tier 1 capital. The Tier 1 capital has no maturity date. The hybrid Tier 1 capital may be redeemed and repaid by the issuer only after five years, and the coupon amounts to 10 percent p.a.
In the case of both issuances, the repayment is limited to the nominal amount issued. The investor does therefore not participate in the value growth of Raiffeisen International; hence there is no dilution of the existing shareholders.
The calculated core capital (Tier 1) of Raiffeisen International according to the Austrian banking regulations of the Austrian Banking Act (BWG) will increase as a result of both measures taken, to a total from EUR 5,367 million to EUR 6,617 million (pro forma as of 31 March 2009). The Tier 1 ratio (total) will improve from 7.7 percent to 9.5 percent (pro forma as of 31 March 2009) and the Tier 1 ratio (credit risk) will improve from 9.2 percent to 11.4 percent. The proceeds serve above all to further strengthen the capital base of Raiffeisen International and its Network Banks.
The Semi-Annual Report will be published on 13 August.
Raiffeisen International operates one of the largest banking networks in CEE, covering 17 markets across the region through subsidiary banks, leasing companies and a range of other financial service providers. The group’s nearly 62,000 employees service 14.9 million customers via more than 3,200 business outlets. Raiffeisen International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Osterreich AG (RZB), which owns about 70 per cent of the common stock. The remainder is in free float, with the shares listed on the Vienna Stock Exchange. RZB is a leading corporate and investment bank in Austria and the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group.