FORTIS: Fortis reaction on decisions of former subsidiairies not to call hybrid instruments

Fortis took good notice of ASR's (the former Fortis Verzekeringen Nederland) announcement not to call the hybrid instruments issued by Fortis Capital Funding Trusts, with ISIN codes USU3456R1006 and USU3456N1091 on the scheduled first call date 26 April 2009. After the call date the coupon on these instruments will amount to 3 months Euribor +230 bps; the coupon payments by ASR on the instruments are conditional on ASR Levensverzekering N.V. keeping a solvency ratio of at least 200% of the regulatory required minimum margin. ASR intends to exchange the existing instrument in the coming months.

Fortis wishes to clarify that its parent companies Fortis NV/SA and Fortis N.V. granted guarantees on these instruments, as the Dutch insurance activities performed by ASR formerly belonged to the Fortis group. The guarantee entails that if ASR Levensverzekering would breach the mentioned minimum solvency level, while Fortis would declare a dividend, Fortis SA/NV and Fortis N.V. will be held liable for the coupon payments during one year after declaration of such a dividend, without any possibility of recourse against ASR.

Fortis announced on 15 March 2009 not to pay a dividend. As long as Fortis does not resume a dividend payment, no claims can be made against Fortis, regardless the evolution of the solvency ratio of ASR Levensverzekering. This contingent liability stops existing at the exchange of the instruments by ASR.

Non-call Fortis Bank Nederland

Fortis also took good notice of the decision of Fortis Capital Company (hereafter FCC) not to cancel the outstanding preference shares (ISIN code GB0057047275), which provide regulatory capital for Fortis Bank Nederland (Holding) N.V. and have a first call date at 29 June 2009.

Fortis entered into a support agreement relating to this instrument, as Fortis Bank Nederland (Holding) formerly also belonged to the Fortis Group. Given FCC's decision not to call the outstanding preference shares, holders of these preference shares may either elect to stay in the instrument and receive a coupon of 3 months Euribor +260 bps or elect to exchange their shares for Fortis ordinary shares, to be delivered by Fortis. Following the election for exchange by the holders of the preference shares, FCC may decide that the preference shares will be redeemed against cash to be delivered by Fortis, instead of through delivery of Fortis ordinary shares, provided that DNB and CBFA consent to this cash redemption.

In order to address any concerns as to the possible dilution triggered by this process, Fortis wishes to explain that it is currently legally prevented from issuing new shares until the proposed two capital reductions will have been approved by the shareholders of Fortis SA/NV and will have become effective. Fortis would therefore not be in a position to deliver new shares to FCC in the event that the holders would elect for stock settlement and may need to deliver cash or shares that are bought back from the market. Fortis will contact FCC and the regulators to on the one hand confirm its intention to fulfill its commitment towards FCC, but on the other hand to do this in such a manner that dilutive effects for shareholders will be prevented to the extent possible.

The net cash position of Fortis allows to buy back shares to deliver shares or cash, if so demanded by FCC. If Fortis would buy back shares from the market, it will appropriately inform the market in this respect.

In line with what is foreseen in the underlying documentation with the aim of maintaining the Tier 1 capital of Fortis Bank Nederland (Holding) N.V., if Fortis would be asked to fulfill its commitments, it is Fortis's position that it is entitled to be compensated through delivery of a subordinated loan, preference or ordinary shares of Fortis Bank Nederland (Holding) or any other compensation acceptable in the given circumstances.

Fortis holding (Fortis SA/NV and Fortis N.V.) consists of (1) Fortis Insurance Belgium (2) Fortis Insurance International, and (3) financial assets and liabilities of various financing vehicles. The international insurance activities (Fortis Insurance International) are located in the UK, France, Hong Kong, Luxembourg (Non-Life), Germany, Turkey, Russia, Ukraine and in joint ventures in Luxembourg (Life), Portugal, China, Malaysia, India and Thailand. Fortis holding is not involved in banking activities.

This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

PDF version press release: [ http://hugin.info/134212/R/1301254/297452.pdf ]

Contributing Sources

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FORTIS: Fortis reaction on decisions of former subsidiairies not to call hybrid instruments