Exchange Offer and Issue of Basel III Compliant Bonds with a PONV Write-down Feature by EFG International

EFG International, a global private banking group headquartered in Zurich with EFG International AG’s registered shares listed on the SIX Swiss Exchange, made an exchange offer to proactively manage and strengthen the quality of its regulatory capital in light of the transition to the Basel III Framework by converting regulatory capital subject to a 10 year phase out into fully Basel III compliant regulatory capital. Both the extraordinary meeting of shareholders of EFG International AG and the meeting of holders of the EFG Fiduciary Certificates have approved the offer on 10 January 2012.

In the exchange offer, EFG International invited holders of the Euro 400 million EFG Fiduciary Certificates listed on the Luxembourg Stock Exchange to exchange Fiduciary Certificates into new Tier 2 Notes issued by its subsidiary EFG International (Guernsey) Limited and guaranteed by EFG International AG on a subordinated basis. The new Tier 2 Notes include a so-called PONV write-down feature making them the first issue of this kind in Europe from a non “Too Big To Fail Bank”. The PONV write-down feature is a contractual provision where investors waive their rights under the Tier 2 Notes upon the “point of non-viability”, i.e. (i) if the Swiss Financial Market supervisory authority FINMA decides that a write-down of the Tier 2 Notes is necessary to maintain the viability of the Bank; or (ii) upon the decision to make an injection of public sector capital without which the Bank would become non-viable.

A total of 135,219 EFG Fiduciary Certificates, representing approximately 33.8% of the outstanding principal amount of EFG Fiduciary Certificates, were validly tendered and accepted for exchange by EFG International (Guernsey) Ltd. In exchange EFG International (Guernsey) Ltd. issued Euro 67,604,000 principal amount of Basel III compliant Tier 2 bonds on settlement of the exchange offer on 13 January 2012. The new bonds have a maturity of 10 years and for the first 5 years pay an annual interest coupon of 8%. The outstanding number of EFG Fiduciary Certificates reduced from 400,000 to 264,781, representing a total nominal amount of approximately Euro 265 million.

Reference: CapLaw-2012-6