Government reinforces SNS REAAL's capital position by EUR 750 million
Press release
| Date | 13 November 2008 |
The government is reinforcing the capital position of SNS REAAL N.V. (hereafter: SNS REAAL) by EUR 750 million. The Ministry of Finance and de Nederlandsche Bank came to this agreement on Wednesday 12 November. With this capital reinforcement, SNS REAAL remains a healthy and well-managed insurance company that has a strong capital buffer.
SNS REAAL is thus using the facility offered by the Dutch government, since 9 October 2008, to sound and viable financial enterprises that are facing unexpected external shocks. The Dutch government has made EUR 20 billion immediately available for the recapitalisation of the financial sector that is now proceeding internationally.
The government obtains EUR 750 million in securities, which have largely the same features as shares. These securities enhance the capital strength of SNS REAAL (as confirmed by DNB).
The agreement with SNS REAAL meets the terms and conditions attached to a call on the government capital provision scheme. The government shall nominate two Supervisory Board members, who shall have the right to veto important decisions relating to substantial acquisitions and investments; or increases or reductions in outstanding capital; or changes to remuneration schemes. In addition, these Supervisory Board members shall join the Committees of the Supervisory Board. SNS REAAL will develop a sustainable remuneration policy in line with recent international standards. All members of the Executive Board shall relinquish their bonuses over 2008 – both in cash payments and in options or shares. SNS REAAL shall develop sustainable renumeration policy and limit exit schemes or statutory compensation for dismissal to one year’s fixed salary. The costs incurred by the Dutch government and De Nederlandsche Bank in carrying out this capital provision shall be borne entirely by SNS REAAL.
The rate of return on the securities shall be the maximum of either:
- 8.5 per cent, or
- 110 per cent of the 2009 dividends, 120 per cent of the 2010 dividends and 125 per cent of the dividends on any year starting 2011,
This coupon will be payable if dividends are awarded over the preceding year.
This structure is an incentive to SNS REAAL to withdraw from this government participation as soon as justified by the share price and the capitalisation.
SNS REAAL may terminate this scheme by redeeming the securities in cash at 150% of the issue price or converting them into ordinary shares after three years. Within one year after issuance, SNS REAAL may redeem the first EUR 250 million in cash at the issue price subject to certain specific conditions.
The issue price of the securities has been set at EUR 5.25, based on SNS REAAL's recent average share price.
Stichting Beheer SNS REAAL is to reinforce the capital of SNS REAAL by EUR 500 million, bringing the total capital reinforcement contributed by the State of the Netherlands and the Stichting Beheer SNS REAAL to EUR 1,250 million.
