Note 17 – Perpetual subordinated capital securities Amounts in $000
Issue of perpetual subordinated capital securities Related transaction costs
2011
100,000 (1,138)
98,862
2010
100,000 (1,595)
98,405
The securities were issued on 20th August 2008 and are listed for trading on the London Stock Exchange. Interest payable on the securities amounts to 9 per cent per annum until 2013. Following 2013, the interest rate will vary with LIBOR rates. The securities are perpetual but can be redeemed at the option of the Association after a five year non call period.
The structure of the perpetual capital securities as Innovative Tier 1 capital means that the Association has the right, but not the obligation, to defer interest payments if a Regulatory Intervention occurs or the Solvency Condition (being 125% of the Associations Enhanced Capital Requirement) is not met. No interest will accrue on any Deferred Interest Payment. Any Deferred Interest Payment may be satisfied at any time at the Association’s election, provided that the Association must satisfy such Deferred Interest Payment on the earliest of the following to occur:
• the date on which a Regulatory Intervention no longer applies and the Association meets and, after payment of the Deferred Interest will meet, the Solvency Condition;
• a distribution of assets is made to Members of the Association generally (other than in their capacity as Senior Creditors);
• the date on which a return of Surplus Calls is made;
• any payment is made on any securities or other obligations which rank pari passu with or junior to the Capital Securities;
• a redemption of the Capital Securities; and • winding-up.
Where an Interest Payment is deferred, the Association will be restricted from making payments on, or redeeming, any Parity Securities or junior obligations unless and until it pays (including by way of alternative satisfaction mechanism, ASM) in full all current and Deferred Interest Payments.
The ASM provides that investors should always receive payments made in respect of Capital Securities in cash or by way of an issue to them of payment in kind, PIK, securities.
For Deferred Interest Payments the Association must, and for any other Interest Payments the Association may, use any of the following or combination thereof (as the Board of Directors deems appropriate) to satisfy that payment:
• out of the amounts raised after the relevant Interest Payment Date from new Capital Items which the Association determines in its sole discretion remain available for such use at that time;
• by issuing PIK Securities (ie a further issue of fully-fungible Capital Securities) to holders; or
• by issuing Other Payment Securities (ie a new issue of securities pari passu with the Capital Securities) – such amount to be calculated by a Calculation Agent appointed at the time - to the Trustee, which will then be sold to purchasers for a cash amount.
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