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BFA-Bankia expects to culminate recapitalisation in May

22 March 2013

Category: Corporate

  • Bankia will issue new shares for approximately €15,540 million.
  • The shares will have a nominal value of 0.01 euros, compared with two euros at present, and will undergo a reverse split (probably 100x1) to facilitate trading.
  • After the reverse split, the shares will have a nominal value of around one euro.
  • Holders of preferred participating securities and subordinated debt will receive fully liquid shares.
  • The BFA and Bankia solvency ratio will be above 9.5% (Core Tier I).

The BFA-Bankia Group plans to culminate the bank's recapitalisation in May, once trading begins in the new shares issued by the Bank for approximately 15,540 million euros to substitute the contingent convertible bonds subscribed by BFA and to be swapped for the preferred participating securities and subordinated debt still in circulation.

Once all of these steps have been taken, both BFA and Bankia will have a solvency ratio (Core Tier I) of more than 9.5%.

The operation, which has been cleared by the Governing Committee of the Fund for Orderly Bank Restructuring (FROB), is organised into several steps.

Pursuant to the Memorandum of Understanding signed by the Spanish State, these operations require burden sharing to minimise the impact of the Group's recapitalisation on taxpayers.

In this regard, the nominal value of the Bankia shares, which is currently two euros, will be reduced prior to these capital increases to 0.01 euros (the nominal value is not the trading price).

In order to facilitate quotation and trading of the shares, Bankia will carry out a reverse split that will probably result in current shareholders holding one share for every 100 existing shares, so that the nominal value will be around one euro, with no effect on the value of their shareholdings.

Afterwards, two simultaneous capital increases will be carried out, at an identical subscription price.

In one, the 10,700 million euros of contingent convertible bonds issued by Bankia and entirely subscribed for by BFA will be redeemed and replaced by shares. This will involve a capital increase with preferential subscription rights for current Bankia shareholders that will be wholly underwritten by BFA.

In that same period, the FROB will carry out a mandatory management action for hybrid instruments in which preferred participating securities and subordinated debt will be repurchased at a discount from their face value, with compulsory reinvestment in Bankia shares. For subordinated debt with a maturity date, customers may choose between the principal or a bond or deposit until the maturity date of their original product.

The FROB will impose on customers who hold hybrid instruments a writedown from their initial investment that will average 38% in the case of preferred participating securities, 13% for subordinated debt with maturity date and 36% for perpetual subordinated debt.

The customers, both retail and institutional customers, will receive fully liquid shares.

The new shares are expected to be allocated in May, both in the case of those from the capital increase with preferential subscription rights (10,700 million euros) and those arising in connection with the swaps of the preferred securities and subordinated debt (approximately 4,840 million euros).

The new shares will begin trading on the market during the course of May.

Once all of these steps have been taken, both BFA and Bankia will have a solvency ratio (Core Tier I) of more than 9.5%.

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