excerpt of the term sheet for the zero coupon bearer bonds

EXCERPT OF THE
TERM SHEET FOR THE
ZERO COUPON BEARER BONDS
Issuer
KAF
Guarantor
The Federal Republic of Austria
Guarantee
Abstract, explicit, unconditional and irrevocable guarantee by the
Federal Republic of Austria upon first demand of any amount payable
under the Notes, compatible with capital market standards
Amount (nominal value)
EUR [l] billion
Issue Date
no later than 31 October 2016
1
Term
13.500 years (subject to adjustments pursuant to Schedule A and
Schedule B of the Term Sheet) starting on the Issue Date and ending
on the Maturity Date
Maturity Date
As initially determined pursuant to Schedule A
Redemption Price
100 percent of the Amount
EoD Redemption Price
Repurchase Price as set out in Schedule B
Early Redemption Event
Permanent Failure by the Stabiliser to provide or to perform the
2
Stabilisation. "Permanent Failure" shall constitute any failure of the
Stabiliser (as defined below) (for whatever reason, including by virtue
of insolvency) to provide or perform the Stabilisation (i) for more than
three consecutive or in total 13 Austrian banking days or (ii) on any
day of the last two Austrian banking days of the Stabilisation Period.
For the avoidance of doubt, an Early Redemption Event can only occur
during the Stabilisation Period (until the end of the following
settlement period).
In case of an Early Redemption Event, the early redemption will occur
10 Austrian banking days after the respective Early Redemption Event
at the Redemption Price.
Interest Payment
Zero coupon
Denomination
EUR 1.00
Listing / Rating
Stock exchange Frankfurt / Vienna / Luxembourg (regulated market);
rating by two independent rating agencies (S&P, Moody's or Fitch)
1
2
Subordinated Creditors will have the option to either (a) exchange their class B debt Instruments*) based on the ratio set out at "Eligible
Subscribers" of this term sheet or to (b) subscribe to zero coupon bearer bonds which are based on the same terms and conditions, except that
(i) the term will be approx. 54 years and (ii) the Repurchase Price will be based on a similar logic as outlined in Schedule B reasonably adjusted
to reflect the longer term. The Republic of Austria does not see the necessity for a stabilization mechanism for the instrument described under
(b); to be further discussed. In this respect, subordinated Creditors have made the following proposal: If no subordinated Creditor (MoUGläubiger as defined in the MoU) disagrees, the Issuer may issue a loan instrument (Schuldscheindarlehen) instead of the zero coupon bearer
bond described in (ii) above, such loan note being based substantially on the same terms and conditions as the zero coupon bearer bond,
provided that no Stabilisation has to be provided for such loan note.
Perform means delivery versus payment.
Creditors expect same rating as bonds issued by the Federation
Documentation
Standalone eurobond documentation including standard legal opinions
to the satisfaction of the creditors, which sets out all legal and
economic details, including as to the Guarantee
Applicable Law / Jurisdiction
Zero coupon bearer bonds will be governed by English law (with a
CAC), exclusion of the Kuratorengesetz; Guarantee will be governed
by German law
Jurisdiction in London for the zero coupon bearer bonds and
jurisdiction in Frankfurt / Main for the Guarantee
Status
Senior, KAF has to remain an SPV with no activities other than those
3
expressly set forth in the Documentation
Collateral
Collateral to be provided by the Issuer
Negative Pledge
Customized documentation
Eligible Subscribers
The zero coupon bearer bonds will be issued solely in the context of
the Transaction as consideration to holders of HETA debt instruments
(HETA-Schuldtitel) set forth in Annex A and Annex B to the Tender
Offer Memorandum dated 21 January 2016 and who accept the
Transaction. The exchange ratio shall follow the provisions of the offer
(class A*) debt instruments 1:1; class B*) debt instruments 1:2).
HETA creditors will be considered for the Transaction with the original
nominal amount plus accrued interest as of 1 March 2015 as basis for
the exchange ratio (before the FMA bail-in decree dated 10 April
2016).
FX Conversion Rate for HETA
Holders of CHF and JPY bonds can participate in the Transaction Offer
debt instruments Non-
at the exchange rates as of 1 March 2015 specified for CHF and JPY in
denominated in EUR
the FMA bail-in Decree of 10 April 2016.
Events of Default ("EoD")
Customized documentation
Stabilisation
The Stabiliser shall undertake for the period following the end of the
Holding Period (as defined below) until the end of the Stabilisation
Period (as defined below), to make bids once a day (on Austrian
banking days) to repurchase the zero coupon bearer bonds at the
Repurchase Price**) (without volume limits). The settlement date
(Valutatag) may be up to 8 Austrian working days after the respective
trading day (Handelstag).
Permanent Failure of the Stabiliser to comply with this undertaking
constitutes an Early Redemption Event.
The documentation of the Transaction will set forth in detail the
3
It is the understanding of the parties that KAF is exhaustively permitted to perform the following activities: purchasing/tendering for HETA
Notes, issuing the zero coupon bearer bonds; holding and administering the HETA debt instruments, receiving distributions on HETA debt
instruments, borrowing from ABBAG / Bund / Land Kärnten; purchasing zero coupon bearer bonds at the Repurchase Price during the
Stabilisation Period and investing any cash into Austrian governmental bonds.
effective implementation and safeguarding of the Stabilisation.
Stabiliser
Issuer, ABBAG or a comparable solvent entity (acceptable to the
creditors in advance of the Stabilisation)
Holding Period (Halteperiode)
60 or less calendar days commencing with the Issue Date
Stabilisation Period
180 calendar days beginning with the end of the Holding Period
The Stabilisation Period will be extended automatically by the number
of Austrian banking days on which the Stabiliser temporarily fails to
provide or perform the Stabilisation.
*)
Definition according to the offer of 21 January 2016 of the Carinthian Compensation Payment Fund.
**)
For details see Schedule B to the Term Sheet.
SCHEDULE A TO THE TERM SHEET
The spread to the Euro Swap Rate for determining the Maturity and the Repurchase Price of the zero
coupon bearer bond ("Spread") will be fixed and rounded to 0.1 basis points one week prior to the
publication of the Transaction Offer. The absolute value of the Spread must be equal to, or less than,
twenty basis points (i.e. the Spread is set between -20 and +20 bps). For the avoidance of doubt,
once fixed, the Spread can no longer be amended. As a result, the fixed Spread will also be used
(i) two Austrian banking days prior to the Issue Date to determine the Maturity Date and (ii) to
determine each Repurchase Price on each Austrian banking day during the Stabilisation Period.
The maturity ("Maturity") of the zero coupon bearer bond will be calculated two Austrian banking
days prior to the Issue Date according to the price formula set forth in Schedule B and utilizing the
Spread fixed according to the first paragraph and the Euro Swap Rate then observed. The Maturity
shall be determined such that, at time of determination, the Price of the offered zero coupon bearer
bond (as defined in Schedule B) shall correspond to the price of a hypothetical zero coupon bearer
bond with a term of 13.500 years priced according to the price formula set forth in Schedule B
utilizing the Euro Swap Rate as observed on 18 April 2016 (0.7765%) and a spread of 0.7 bps
(corresponding to a total yield of 0.7835% for “Y” in the formula of Schedule B).
SCHEDULE B TO THE TERM SHEET
Price (in percentage points) =
(
)
x 100; the result will be rounded to three decimals; n equals the
period of the Term remaining from the date of a Repurchase Price calculation to the Maturity Date of
the zero coupon bearer bond (in years with the day count convention being actual/ actual rounded
to three decimals)
Y = (Euro Swap Rate for a term of n years) + Spread
Euro Swap Rate = Euro par swap rate for a term corresponding to the respective remaining Term of
the zero coupon bearer bond, as determined by the Stabiliser via its respective calculation agent at
11.15 a.m. CET on the date of determination and published on the Bloomberg-page ISDA under
Fixing Rates – Euribor A on the date of determination. The applicable rate will be the day-weighted
(actual/actual) linearly interpolated rate between the two maturities closest to the term of the zero
coupon bearer bond. If the applicable rate is not available on an Austrian banking day, the
documentation will provide for an international standard market disruption language (adjusted to
the case at hand according to the ISDA template).
Spread = spread, as fixed one week prior to the publication of the Transaction Offer (in accordance
with Schedule A). For the avoidance of doubt, the Spread to be used to calculate the Repurchase
Price shall be identical to the one determined one week prior to the publication of the Transaction
Offer in accordance with Schedule A. For further clarification, it is agreed that the Spread was 0.7 bps
on 18 April 2016 and will be newly fixed pursuant to Schedule A. The Spread will be rounded to 0.1
basis points.
Repurchase Price = Price as determined on each Austrian banking day on which a repurchase price is
required to be made in accordance with the above definition of Price.