Bank of Scotland gets OK to restructure series 22 bonds to soft bullet

By Susanna Moon

Chicago, Aug. 12 – Bank of Scotland plc said it obtained bondholder approval Wednesday to restructure one more series of notes to that of soft bullet maturity after the meetings for two note series were adjourned July 29.

The adjourned meetings were held Aug. 12 in London for holders of the following covered bonds:

• €1.25 billion series 22 covered bonds due 2017, and the measure passed; and

• €1.25 billion series 4 covered bonds due 2019, and the measure failed to pass;

Now, the series 22 covered bonds, along with the series 17 covered bonds, the series 26 covered bonds, the series 16 covered bonds and the series 23 covered bonds, will be modified to soft bullet covered bonds from hard bullets with:

• An extended due for payment date falling on or nearest to the date that is 12 calendar months after the final maturity date for that series; and

• Interest payable from and including the extension date to but excluding the extended due for payment date, or if earlier, the date on which the final redemption amount is paid in full, monthly in arrears and determined by using the sum of one-month Euribor or one-month Cibor plus a margin.

The consent fee for the series 22 covered bonds will be 0.05%, with payment on Aug. 19.

For the series 4 covered bonds, the quorum required for the meeting was met, but the amendments were not passed, according to a bank notice.

The bank said on July 29 that it succeeded in obtaining bondholder approval to restructure four series of notes to that of soft bullet maturities.

The meetings were held July 29 in London for holders of the following covered bonds:

• €1.5 billion series 17 covered bonds due 2016, and the measure passed;

• €1.25 billion series 22 covered bonds due 2017, and the meeting was adjourned;

• Kr 4.68 billion series 26 covered bonds due 2018, and the measure passed;

• €1.25 billion series 4 covered bonds due 2019, and the meeting was adjourned;

• €1.5 billion series 7 covered bonds due 2020, and the measure failed to pass;

• €1.5 billion series 16 covered bonds due 2021, and the measure passed; and

• €1.25 billion series 23 covered bonds due 2022, and the measure passed.

The meetings were announced July 7.

More details

Quorum required at least one or more persons representing at least two-thirds of the outstanding amount of each series of covered bonds.

For the measure to pass, at least a majority consisting of at least three-fourths of the votes cast needed to be in favor.

The solicitation agents are Deutsche Bank AG, London Branch (+44 207 545 8011 or liability.management@db.com) and Lloyds Bank plc (+44 20 7158 2720 or bosconsentsolicitation@lloydsbanking.com).

The tabulation agent is Lucid Issuer Services Ltd. (+44 20 7704 0880 or lbg@lucid-is.com). The principal paying agent is Citibank, NA, London Branch (+44 20 7508 3830/3835, telefax +44 20 7508 3875/3876).

Background

As previously announced, the Bank of Scotland’s €60 billion covered bond program was established in the United Kingdom in 2003. Bank of Scotland was registered as a regulated covered bond issuer in 2008, and all covered bonds issued under this program are regulated covered bonds.

The program previously only permitted issuing hard bullet covered bonds, which require all amounts to be repaid at maturity, and failure to do so results in an event of default.

The bank said that more recently established covered bond programs have included the option for a soft bullet maturity structure, which allows deferring payments due at maturity for one year until an extended maturity date.

As part of its balance sheet management, the issuer said it updated its program to include the soft bullet maturity structure.

Bank of Scotland is based in Edinburgh.

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