- General questions regarding background and structure
- Why is Nordea doing the Rights Offering?
- The Rights Offering enables Nordea to maintain its position as one of the stronger banks in Europe
- The Rights Offering gives the bank an additional cushion to manage for an uncertain economic outlook. At the same time Nordea believes that the current market conditions create possibilities to selectively exploit high credit quality business opportunities
- A rights offering provides a fair and transparent market solution
- How large is the Rights Offering?
The Rights Offering will raise approximately EUR 2.5bn after estimated aggregate costs and expenses.
- Why is Nordea reducing the dividend to EUR 0.20 per share?
Many shareholders value the dividend, which is why Nordea believes paying a reduced dividend strikes the right balance between the bank’s intentions to increase capital and the requirement to have an appropriate distribution policy at this particular point in time.
- Is the Rights Offering underwritten?
Yes, the Rights Offering is fully underwritten through a combination of commitments from existing shareholders and underwriting by J.P. Morgan Securities Ltd. and Merrill Lynch International, subject to customary terms and conditions.
- Is the Swedish State committed to the Rights Offering?
Nordea’s largest shareholder, the Swedish State, will subscribe for its pro-rata share of 19.9% in the Rights Offering.
- Has the Swedish State required any conditions for their participation in the Rights Offering?
In order to facilitate the Swedish State’s subscription through the Swedish National Debt Office (Sw. Riksgälden), Nordea has signed an agreement with the Swedish National Debt Office in accordance with the new Ordinance on Capital Injections in Solvent Banks and Others.
- How did Nordea arrive at the Rights Offering amount of EUR 2.5bn?
Nordea believes this amount gives Nordea both a sufficient additional capital cushion above the bank’s existing target capital ratios to protect the bank against the increased uncertainty in the market and economic outlook and gives the bank the flexibility to selectively pursue high credit quality business opportunities. Nordea believes that the capital strengthening measures, including the Rights Offering and proposed dividend reduction, will put Nordea in a strong position with a pro forma Core Tier 1 capital ratio at 10%. The capital strengthening measures are expected to position Nordea as one of the best capitalised banks in Europe.
- How much of the Rights Offering will be used to increase lending?
Any figures for additional lending are purely hypothetical at this stage. In the short term Nordea is not changing the bank’s growth plans due to the Rights Offering. Nordea is already planning to increase lending somewhat, but at a clearly slower rate than in 2008, which in the bank’s view is possible without negatively affecting the Core Tier 1 capital ratio, also taking some credit migration into account. However, when the economy stabilises and visibility in the market improves, Nordea will have the capacity to increase lending and support high quality customers.
- Why has this been decided now – has the situation measurably deteriorated recently?
No, Nordea maintains its position as one of the stronger banks in Europe, entering a challenging 2009, and has a strong starting position with a Tier 1 capital ratio of 9.3% excluding transition rules. Nordea is keen to maintain and reinforce the bank’s strong position going forward, by taking measures including supporting our current strong credit rating, thereby retaining the current favourable funding position relative to peers.
- How will Nordea’s dividend policy be affected by the Rights Offering?
There is no change to the long-term dividend policy. The dividend reduction for 2008 reflects the need to strike an appropriate balance between the needs of shareholders and the requirements of the company to have an appropriate distribution policy at this particular point in time.
Nordea’s dividend policy is that the total dividend payment shall exceed 40% of the net profit for the year.
- Is this capital raising sufficient or is there a risk that Nordea will have to ask for more capital in a few months as we have seen with other financial institutions?
Nordea feels very comfortable with its capital position post the Rights Offering, both in relative and absolute terms, and have no plans to ask shareholders for more in the foreseeable future. However, Nordea cannot at this stage exclude the possibility of a need to tap the subordinated debt market should the terms be attractive.
- Why have Nordea changed its mind regarding hybrid loans and rights offerings being too expensive, time consuming and complicated?
Market perception of what constitutes a strong capital base has changed rapidly over the course of the last months. For a long time Nordea actually thought it would be enough to strengthen the capital base by issuing hybrid loans. But the market has clearly told Nordea that there is a strong preference for core capital, under these extraordinary market circumstances. The Rights Offering reinforces Nordea’s capital base with the highest quality capital in the form of straight equity, is fully transparent and secures fair treatment of shareholders through the application of pre-emptive rights.
- Does Nordea rule out issuing hybrid capital at a later stage?
No, Nordea does not rule out anything. That decision will depend on the market conditions for hybrid capital and the growth of the business. Nordea has significant capacity to increase hybrid capital as a percentage of the capital base.
- Details on the Rights Offering
- When is the record date?
The record date, which determines the right to receive subscription rights, is on 17 March 2009.
The last day of trading in the Nordea share/FDR including the right to receive subscription rights is 12 March 2009, i.e. you must acquire shares/FDRs in Nordea on 12 March at the latest to be registered as a shareholder on the record date.
- What are the terms of the Rights Offering?
- According to the terms of the Rights Offering, each one (1) existing share entitles to eleven (11) subscription rights
- You need twenty (20) subscription rights to subscribe for one (1) new shares
- Put differently, each twenty (20) existing shares in Nordea entitles to eleven (11) new shares
- What is the subscription price?
The new shares will be issued at a subscription price of either EUR 1.81, SEK 20.75 or DKK 13.49 per new share. The subscription price shall be paid in:
- SEK or EUR if subscription takes place by exercise of subscription rights registered with the Swedish securities system (Euroclear Sweden-formerly VPC) and traded on NASDAQ OMX Stockholm;
- EUR if subscription takes place by exercise of subscription rights registered with the Finnish securities system (Euroclear Finland-formerly APK) and traded on NASDAQ OMX Helsinki; and
- DKK or EUR if subscription takes place by exercise of subscription rights registered with the Danish securities system (VP Securities-formerly Værdipapircentralen) and traded on NASDAQ OMX Copenhagen.
Hence, there are separate instructions for participation in the rights offering depending on where the shareholders' subscription rights are registered and traded. This also applies to subscription without subscription rights for new shares to be registered in the respective securities system.
- When can I subscribe for new shares?
The subscription period runs during the period 20 March–3 April 2009. Subscription for new shares with subscription rights and application for subscription of new shares without subscription rights must be made during the subscription period. If your shareholding is registered with a nominee, note that certain nominees might require subscription at an earlier date than 3 April 2009.
- When can I trade subscription rights?
Trading in the subscription rights starts on 20 March 2009, on the NASDAQ OMX Stockholm and Copenhagen ending 31 March 2009 and on NASDAQ OMX Helsinki ending 27 March 2009.
- Can I transfer my subscription rights to other countries?
The subscription rights will not be transferable between the Swedish, Finnish or Danish securities systems.
- What does it mean that the shares are issued at a discount to the share price?
There is a difference between how you structure a rights offering with pre-emptive rights for existing shareholders and an equity offering without pre-emptive rights. In a rights offering, the discount is irrelevant to existing shareholders. The deeper the discount, the higher the rights value will be, and a shareholder’s net worth is the same, assuming they take up their rights in full. There is no economic dilution as long as you either subscribe for new shares or sell your subscription rights.
- What is the discount to the share price in the Rights Offering?
The subscription price corresponds to an implied discount of approximately 44% to the theoretical ex-rights price adjusted for the proposed dividend, based on the closing price on 10 March 2009 for Nordea’s share listed on NASDAQ OMX Stockholm.
- What does TERP stand for?
TERP is short for Theoretical Ex-Rights Price. Mathematically, the TERP equals the market cap pre a rights offering plus the proceeds raised in the rights issue, divided by the number of shares outstanding before the rights offering and the number of shares issued in the rights offering. The market cap is calculated as the closing share price on the day before detachment of subscription rights multiplied by the number of shares outstanding.
The TERP in the Rights Offering is calculated as:
Nordea's share price on 12 March * No. of Nordea shares on 12 March + Proceeds from the Rights Offering No. of Nordea shares on 12 March + No. of new shares issued in the Rights Offering
On the ex-rights date, i.e. the first day the share trades without the right to receive subscription rights, the theoretical value of the share will be TERP. Theoretically, the value of the subscription rights associated with a share is equal to the difference between the cum-rights price of the share and the theoretical ex-rights price of the share.
It should be noted that the new shares do not entitle the holders to dividend for the financial year 2008 (to be decided at the AGM on 2 April 2009). Hence, discount to TERP adjusted for dividend will be lower than the discount to TERP.
- What is international market practice when it comes to discount to share price?
In recent European rights issues the discount to TERP, the Theoretical Ex Rights Price, has been around 40%.
- Shareholders’ alternatives in the Rights Offering
- What are my alternatives in the Rights Offering?
You have the following alternatives:
- Participate in the Rights Offering by using all of your subscription rights to subscribe for new shares in Nordea
- Refrain from participating in the Rights Offering by selling your subscription rights
- Buy additional subscription rights and subscribe for more shares, or use part of your subscription rights to subscribe for new shares and sell the rest
- You can also apply to subscribe for shares without subscription rights. You are however not guaranteed allocation of shares
- What happens if I do nothing?
This depends on what share ledger your shares in Nordea are registered in. Note that your subscription rights have an economic value if the share price of the Nordea share exceeds the subscription price. To prevent that you lose the value of your subscription rights, you must either subscribe for new shares or sell your subscription rights.
- What if I have been granted subscription rights but do not have the funds to subscribe for new shares?
Nordea expects there to be a liquid and fair market for the trading in the subscription rights. The subscription rights will be listed on NASDAQ OMX Stockholm, Helsinki and Copenhagen. This will enable shareholders to sell part of their subscription rights entitlements in the market to raise funds to subscribe for some shares.
- What is the value of the subscription rights?
The subscription rights will be traded/are traded on NASDAQ OMX Stockholm, Helsinki and Copenhagen. The price will depend on supply and demand.
It should be noted that the pricing of the subscription rights can be affected by the fact that the new shares will not entitle the holder to dividend to be decided on the Annual General Meeting in Nordea on 2 April 2009.
- I am currently not a shareholder. How can I participate in the Rights Offering?
Investors who are currently not holders of Nordea shares have various options:
- You can buy shares in the market before detachment of subscription rights, in which case you will automatically receive subscription rights based on your registered shareholding on record date. The last day of trading including the right to receive subscription rights is 12 March 2009
- You can buy subscription rights in the market during the subscription rights trading period and use these to subscribe for new shares. This will guarantee allocation of new shares
- You can apply for subscription without subscription rights. In this case you are not guaranteed allocation of new shares
- What is the allocation principle for subscription without subscription rights?
Shareholders who have subscribed for shares by virtue of subscription rights will be prioritised in the allocation of new shares, which potentially have not been subscribed for by virtue of subscription rights.
- Will the new shares entitle the holder to dividends?
The new shares will not entitle the holder to the suggested dividend of EUR 0.20 per share to be decided on the Annual General Meeting in Nordea on 2 April 2009.
The new shares will however entitle the holders the same right to dividends as ordinary shares starting from and including the fiscal year 2009.
- Is this an attractive investment for a private individual?
Nordea cannot comment on its own shares and as banking advisors we cannot give an opinion as to whether one should participate in the offer or not.
- How do I subscribe?
Subscription for new shares is to be made during the subscription period 20 March – 3 April 2009. Detailed information on how to subscribe will be made available to shareholders at the beginning of the subscription period.
- How do I get more information on the Rights Offering?
You are welcome to contact Nordea if you have any questions. Note that you should contact Nordea in the country in which share ledger your shares are registered.
Sweden: +46 8 678 0440
Finland (Finnish): +358 200 3000
Finland (Finland-Swedish): +358 200 5000
Finland (English): +358 200 70000
Denmark: +45 3333 5092
- General questions regarding rights offerings
- What is a rights offering?
A rights offering enables a company to raise more money to its operations by issuing new shares to existing and/or new shareholders.
- What is a subscription right?
A subscription right is a financial instrument which entitles the holder to subscribe for a certain number of new shares at a defined subscription price.
- What is an interim share?
An interim share is a share which exists during a limited time period. Subscription rights are converted to interim shares and booked on subscribing investors' accounts when the subscription period expires. The interim shares are converted into regular shares after the increase of the share capital has been validly registered. The interim shares are often traded on the stock exchange.
- What is the record date?
The record date is the day when you have to be registered as shareholder to be granted subscription rights. It should be noted that it takes three business days after the acquisition of shares until the registration of the shares is effected (the registration is completed on the settlement day).
- What does it mean that there is a pre-emptive right for existing shareholders in a rights offering?
A rights offering with pre-emptive rights for existing shareholders is a type of rights offering where a company’s shareholders as of a defined day (the record date) are given the primary right to subscribe for new shares. The shareholding on the record date will determine how many shares a shareholder has the pre-emptive right to subscribe for. The pre-emptive right is represented by subscription rights.
- What is subscription without subscription rights?
New shares which are not subscribed for with subscription rights can be offered to the public. Application to subscribe for new shares without subscription right can be submitted by any investor, but the investor is not guaranteed to be granted the number of shares applied for.