TIDMHSBA
RNS Number : 5168B
HSBC Holdings PLC
21 September 2018
HSBC HOLDINGS PLC
ISSUANCE OF PERPETUAL SUBORDINATED CONTINGENT CONVERTIBLE
SECURITIES
On 28 September 2018 (the "Issue Date"), HSBC Holdings plc (the
"Company") intends to issue GBP1,000,000,000 5.875% Perpetual
Subordinated Contingent Convertible Securities (Callable September
28, 2026 and Every Five Years Thereafter) (or up to
GBP1,100,000,000 if the over-allotment option is exercised in full)
(ISIN XS1884698256) (the "Securities").
The Securities are expected to be admitted to the Official List
and to trading on the Global Exchange Market (the "GEM") of The
Irish Stock Exchange plc trading as Euronext Dublin ("Euronext
Dublin") within 30 days of the Issue Date. The denominations of the
Securities will be GBP200,000 and integral multiples of GBP1,000 in
excess thereof.
The Securities are issued pursuant to an indenture dated 1
August 2014 (as supplemented and amended from time to time), as
supplemented and amended by an eighth supplemental indenture (the
"Securities Indenture"), which is expected to be entered into on
the Issue Date. The Company has filed with the Securities and
Exchange Commission (the "SEC") a registration statement on Form
F-3 (filed on 23 February 2018), which includes a prospectus dated
23 February 2018 (the "Base Prospectus"), and a prospectus
supplement dated 20 September 2018 (the "Prospectus Supplement") in
connection with the offering of the Securities. Descriptions of the
terms of the Securities are qualified in their entirety by the Base
Prospectus and the Prospectus Supplement, each of which is
available on the SEC's website at http://www.sec.gov.
Subscription
Placing agents
HSBC Bank plc (the "Sole Structuring Adviser and Book Running
Manager")
ABN AMRO Bank N.V.
Banca IMI S.p.A.
Banco Santander, S.A.
Bank of Montreal, London Branch
Citigroup Global Markets Limited
Commerzbank Aktiengesellschaft
Credit Agricole Corporate and Investment Banking
ICBC Standard Bank Plc
Lloyds Bank Corporate Markets plc
Nomura International plc
Skandinaviska Enskilda Banken AB (publ)
(together with the Sole Structuring Adviser and Book Running
Manager, the "Managers")
Securities Terms Agreement
The Company and the Sole Structuring Adviser and Book-Running
Manager (on behalf of the Managers) have entered into a Terms
Agreement (which incorporates by reference an Underwriting
Agreement - Standard Provisions) dated as of 20 September 2018 in
relation to the Securities (the "Securities Terms Agreement").
Pursuant to the Securities Terms Agreement and subject to
fulfilment of the conditions set out below in the section headed
"Conditions precedent to the purchase", the Managers have agreed
severally and not jointly to purchase the respective amounts of
Securities set forth in Schedule II of the Securities Terms
Agreement, to be issued by the Company on the Issue Date in an
aggregate principal amount of GBP1,000,000,000.
The Company has agreed to grant the Sole Structuring Adviser and
Book Running Manager, on behalf of the Managers, an option to
purchase up to an additional GBP100,000,000 principal amount
(representing an increase of up to 10% of the aggregate principal
amount) of Securities (together, the "Over-allotment Securities")
at the public offering price solely to cover over-allotments, if
any. This over-allotment option is exercisable, at the discretion
of the Sole Structuring Adviser and Book Running Manager, on behalf
of the Managers, once only, in whole or in part, prior to the Issue
Date. If any Over-allotment Securities are purchased, the Managers
will severally purchase such Over-allotment Securities in
approximately the same proportion as set forth in Schedule II of
the Securities Terms Agreement. Over-allotment Securities issued or
sold under the option will be issued and sold on the same terms and
conditions as the Securities.
Conditions precedent to the purchase
The Managers' obligations to purchase and pay for the Securities
on the Issue Date are subject to the satisfaction of a number of
conditions as of the time of payment of the Securities (the
"Closing Time"), including:
(a) the absence of any stop order suspending the effectiveness
of the Company's registration statement on Form F-3 (or pending or
contemplated proceeding for such purpose);
(b) the absence of any material adverse change in the financial
condition, earnings or general affairs of the Company and its
subsidiaries;
(c) the Company's compliance in all material respects with all
agreements, and satisfaction of all conditions, pursuant to the
Securities Terms Agreement and the Securities Indentures;
(d) the accuracy in all material respects of the representations
and warranties of the Company contained in the Securities Terms
Agreement as of the Closing Time;
(e) the absence of a downgrade in the rating accorded to the
Securities by certain rating agencies;
(f) the absence of any change in United States ("US") or United
Kingdom ("UK") taxation directly and materially adversely affecting
US purchasers of the Securities or the imposition of exchange
controls by the US or the UK directly and materially affecting the
Company's ability to pay interest or dividends in US dollars;
and
(g) the timely filing of certain required disclosure documents
with the SEC.
Subscribers
The Company intends to offer and sell the Securities to no less
than six independent placees (who will be independent individual,
corporate and/or institutional investors). To the best of the
knowledge, information and belief of the directors of the Company,
save as described in the immediately following sentence, each of
the placees (and their respective ultimate beneficial owners) will
be third parties independent of the Company and are not connected
with the Company and its connected persons (as defined in the Rules
Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the "SEHK") (the "Hong Kong Listing Rules")).
Pursuant to a waiver granted by the SEHK from strict compliance
with certain requirements of the Hong Kong Listing Rules (which
waiver is described in an announcement by the Company dated 10
January 2017 and which is available on the Company's website), the
Sole Structuring Adviser and Book Running Manager and HSBC
Securities (USA) Inc. may hold Securities from time to time for the
purposes of market-making transactions.
Principal terms of the Securities
The principal terms of the Securities are summarised as
follows:
Issuer The Company
Aggregate principal GBP1,000,000,000 (or up to GBP1,100,000,000
amount if the Managers' over-allotment
option is exercised in full).
Maturity date Perpetual
Issue price 100% of the aggregate principal
amount
Interest Interest on the Securities will
be a rate per annum equal to (i)
5.875%, from (and including) the
Issue Date to (but excluding) 28
September 2026 and (ii) the sum
of the applicable Mid-Market Swap
Rate on the relevant Reset Determination
Date and 4.276% (the "Margin"),
from (and including) each Reset
Date to (but excluding) the next
following Reset Date.
The "Mid-Market Swap Rate" means
the Mid--Market Swap Rate Quotation
that appears on Reuters page "ICESWAP4"
(or such other page as may replace
such page on Reuters or such other
information service, in each case,
as may be nominated by the person
providing or sponsoring the information
appearing on such page for purposes
of displaying comparable rates)
(the "relevant screen page") as
of approximately 11:00 a.m. (London
time) on the relevant Reset Determination
Date, all as determined by the calculation
agent; provided, however, that if
no such rate appears on the relevant
screen page for a five--year term,
then the Mid--Market Swap Rate will
be determined through the use of
straight--line interpolation by
reference to two rates, one of which
will be determined in accordance
with the above provisions, but as
if the relevant Reset Period were
the period of time for which rates
are available next shorter than
the length of the actual Reset Period
and the other of which will be determined
in accordance with the above provisions,
but as if the relevant Reset Period
were the period of time for which
rates are available next longer
than the length of the actual Reset
Period; provided further that if
on any Reset Determination Date
the relevant screen page is not
available or the Mid--Market Swap
Rate does not appear on the relevant
screen page, subject to the first
proviso in the definition of Mid-Market
Swap Rate Quotation below, the calculation
agent will request the principal
office in London of four major banks
in the swap, money, securities or
other market most closely connected
with the relevant Mid--Market Swap
Rate (as selected by the Company
on the advice of an investment bank
of international repute) (the "Reference
Banks") to provide it with its Mid--Market
Swap Rate Quotation as of approximately
11:00 a.m. (London time) on the
relevant Reset Determination Date.
If two or more of the Reference
Banks provide the calculation agent
with Mid--Market Swap Rate Quotations,
the interest rate for the relevant
Reset Period will be the sum of
the Margin and the arithmetic mean
of the relevant Mid--Market Swap
Rate Quotations, as determined by
the calculation agent. If only one
or none of the Reference Banks provides
the calculation agent with a Mid--Market
Swap Rate Quotation, the interest
rate will be determined to be the
rate of interest as of the last
preceding Reset Date or, in the
case of the initial Reset Determination
Date, the Initial Interest Rate.
The "Mid-Market Swap Rate Quotation"
means a quotation (expressed as
a percentage rate per annum) for
the mean of the bid and offered
rates for the fixed leg payable
semi--annually (calculated on the
basis of the actual number of days
in the relevant period from (and
including) the date on which interest
begins to accrue to (but excluding)
the date on which it falls due divided
by 365) of a fixed--for--floating
interest rate swap transaction in
pounds sterling which transaction
(i) has a five--year term commencing
on the relevant Reset Date, (ii)
is in an amount that is representative
for a single transaction in the
pounds sterling swap rate market
at 11:00 a.m. (London time) with
an acknowledged dealer of good credit
in the swap market and (iii) has
a floating leg based on six--month
LIBOR (calculated on the basis of
the actual number of days in the
relevant period from (and including)
the date on which interest begins
to accrue to (but excluding) the
date on which it falls due divided
by 365); provided that, notwithstanding
the second proviso in the definition
of Mid-Market Swap Rate, if the
Company (in consultation with the
calculation agent) determines that
the Mid-Market Swap Rate has ceased
to be published on the relevant
screen page as a result of LIBOR
ceasing to be calculated or administered
for publication, the Company will
use reasonable efforts to appoint
an Independent Financial Adviser
to determine the Alternative Base
Rate and the Alternative Screen
Page by no later than five business
days prior to the Reset Determination
Date (the "Reset Determination Cut-off
Date"). If the Company is unable
to appoint an Independent Financial
Adviser, or if the Independent Financial
Adviser fails to determine the Alternative
Base Rate and the Alternative Screen
Page prior to the Reset Determination
Cut-off Date, the Company will determine
the Alternative Base Rate and the
Alternative Screen Page for the
Reset Period. In either case, the
Mid-Market Swap Rate Quotation will
then be the quotation for the mean
of bid and offered rates determined
as provided above but as if the
reference to LIBOR was a reference
to the Alternative Base Rate on
the Alternative Screen Page with
any required Calculation Changes.
Notwithstanding the foregoing, if
the Company does not determine the
Alternative Base Rate and the Alternative
Screen Page prior to the Reset Determination
Date, the interest rate will be
determined to be the rate of interest
as of the last preceding Reset Date
or, in the case of the initial Reset
Determination Date, the Initial
Interest Rate.
If the Independent Financial Adviser
or the Company determines the Alternative
Base Rate, the Independent Financial
Adviser or the Company, as applicable,
may also, following consultation
with the calculation agent, make
changes to the day count fraction,
the business day convention and
the definition of business day,
in each case in order to follow
market practice, as well as any
other changes (including to the
Margin) that the Calculation Agent,
following consultation with the
Independent Financial Adviser (if
appointed), determines in good faith
are reasonably necessary to ensure
the proper operation of the Alternative
Base Rate or the Mid-Market Swap
Rate, as well as the comparability
of the interest rate determined
by reference to the Alternative
Base Rate to the interest rate determined
by reference to LIBOR (the "Calculation
Changes").
The Company will promptly give notice
of the determination of the Alternative
Base Rate, the Alternative Screen
Page and any Calculation Changes
to the trustee, the paying agent,
the calculation agent and the securityholders;
provided that failure to provide
such notice will have no impact
on the effectiveness of, or otherwise
invalidate, any such determination.
"Alternative Base Rate" means the
rate that has replaced LIBOR in
customary market usage for determining
floating interest rates in respect
of bonds denominated in pounds sterling
or, if the Independent Financial
Adviser or the Company (in consultation
with the calculation agent and acting
in good faith and a commercially
reasonable manner), as applicable,
determines that there is no such
rate, such other rate as the Independent
Financial Adviser or the Company
(in consultation with the calculation
agent and acting in good faith and
a commercially reasonable manner),
as applicable, determines in its
or the Company's sole discretion
is most comparable to LIBOR.
"Alternative Screen Page" means
the alternative screen page, information
service or source on which the Alternative
Base Rate appears (or such other
page, information service or source
as may replace the alternative screen
page, information service or source,
in each case, as may be nominated
by the person providing or sponsoring
the information appearing on such
page for purposes of displaying
comparable rates).
"Independent Financial Adviser"
means an independent financial institution
of international repute or other
independent financial adviser experienced
in the international capital markets,
in each case appointed by the Company
at its own expense.
"LIBOR" means the interest rate
benchmark known as the London interbank
offered rate, which is calculated
and published by a designated distributor
(currently Thomson Reuters) in accordance
with the requirements from time
to time of ICE Benchmark Administration
Limited (or any other person which
takes over the administration of
that rate) based on the estimated
interbank borrowing rate for sterling
that is provided by a panel of contributor
banks.
Agreement with respect By its acquisition of the Securities,
to the alternative each securityholder (which, for
base rate these purposes, includes each beneficial
owner) (i) will acknowledge, accept,
consent and agree to be bound by
the Independent Financial Adviser's
or the Company's determination of
the Alternative Base Rate, the Alternative
Screen Page and any Calculation
Changes, including as may occur
without any prior notice from the
Company and without the need for
the Company to obtain any further
consent from such securityholder,
(ii) will waive any and all claims,
in law and/or in equity, against
the trustee, the paying agent and
the calculation agent for, agree
not to initiate a suit against the
trustee, the paying agent and the
calculation agent in respect of,
and agree that none of the trustee,
the paying agent or the calculation
agent will be liable for, the determination
of or the failure to determine any
Alternative Base Rate, any Alternative
Screen Page and any Calculation
Changes and any losses suffered
in connection therewith and (iii)
will agree that none of the trustee,
the paying agent or the calculation
agent will have any obligation to
determine any Alternative Base Rate,
any Alternative Screen Page and
any Calculation Changes (including
any adjustments thereto), including
in the event of any failure by the
Company to determine any Alternative
Base Rate, any Alternative Screen
Page and any Calculation Changes.
Reset date, reset 28 September 2026, and each fifth
determination date anniversary date thereafter (each,
and reset period a "Reset Date").
The "Reset Determination Dates"
shall be the second London banking
day immediately preceding a Reset
Date.
Each period from (and including)
a Reset Date to (but excluding)
the following Reset Date shall be
a "Reset Period".
Interest payment Semi-annual on each 28 March and
dates 28 September, commencing 28 March
2019, subject to cancellation or
deemed cancellation as described
in the Prospectus Supplement.
Interest cancellation The Company will have sole and absolute
discretion at all times and for
any reason to cancel (in whole or
in part) any interest payment that
would otherwise be payable on any
interest payment date. In addition,
the terms of the Securities restrict
the Company from making interest
payments in certain circumstances,
including where the Company's distributable
items or the maximum distributable
amount is exceeded or the Company
would not be solvent at the time
of such interest payment or the
Relevant Regulator orders the Company
to cancel (in whole or in part)
the interest otherwise payable on
such interest payment date, in which
case the interest payment will be
deemed to have been cancelled.
Automatic conversion If a Capital Adequacy Trigger Event
occurs, then an Automatic Conversion
will occur without delay (but no
later than one month following the
date on which it is determined such
Capital Adequacy Trigger Event has
occurred).
An "Automatic Conversion" is the
irrevocable and automatic release
of all of the Company's obligations
under the Securities in consideration
of the Company's issuance of the
Conversion Shares to the Conversion
Shares Depository (or to the relevant
recipient in accordance with the
terms of the Securities) (on behalf
of the securityholders) on the date
on which the Automatic Conversion
will take place, or has taken place,
as applicable (such date, the "Conversion
Date"), all in accordance with the
terms of the Securities and the
Securities Indenture.
After a Capital Adequacy Trigger
Event, subject to certain conditions,
the Company expects the Conversion
Shares Depository to deliver to
the securityholders on the settlement
date (as determined pursuant to
the terms of the Securities Indenture)
either (i) Conversion Shares or
(ii) if the Company elects, in its
sole and absolute discretion, that
a Conversion Shares Offer be made,
the Conversion Shares Offer Consideration.
"Conversion Shares Depository" means
a financial institution, trust company,
depository entity, nominee entity
or similar entity to be appointed
by the Company on or prior to any
date when a function ascribed to
the Conversion Shares Depository
in the Securities Indenture, is
required to be performed, to perform
such functions and which, as a condition
of such appointment, such entity
will be required to undertake, for
the benefit of the securityholders,
to hold the Conversion Shares (and
any Conversion Shares Offer Consideration)
on behalf of such securityholders
in one or more segregated accounts,
unless otherwise required for the
purposes of the Conversion Shares
Offer and, in any event, on terms
consistent with the Securities Indenture.
Conversion shares "Conversion Shares" means the Company's
and conversion price ordinary shares (the "Ordinary Shares")
to be issued to the Conversion Shares
Depository (or to the relevant recipient
in accordance with the terms of
the Securities) following an Automatic
Conversion, which Ordinary Shares
will be in such number as is determined
by dividing the aggregate principal
amount of the Securities outstanding
immediately prior to the Conversion
Date by the Conversion Price rounded
down, if necessary, to the nearest
whole number of Ordinary Shares.
The "Conversion Price" is fixed
initially at GBP2.70 per Conversion
share and is subject to certain
anti-dilution adjustments as described
below.
Assuming that there is no adjustment
to the Conversion Price, the maximum
number of Ordinary Shares that may
be issued upon an Automatic Conversion
of the Securities is 370,370,370
(or up to 407,407,407 Ordinary Shares
if the Managers' over-allotment
option is exercised in full).
Ranking of conversion The Conversion Shares issued following
shares an Automatic Conversion will in
all respects rank pari passu with
the fully paid Ordinary Shares in
issue on the Conversion Date, except
in any such case for any right excluded
by mandatory provisions of applicable
law, and except that the Conversion
Shares so issued will not rank for
(or, as the case may be, the relevant
securityholder will not be entitled
to receive) any rights, distributions
or payments, the entitlement to
which falls prior to the Conversion
Date.
Capital adequacy A "Capital Adequacy Trigger Event"
trigger event will occur if at any time the End-point
CET1 Ratio is less than 7.0%. Whether
a Capital Adequacy Trigger Event
has occurred at any time will be
determined by the Company, the Relevant
Regulator or any agent of the Relevant
Regulator appointed for such purpose
by the Relevant Regulator.
"End-point CET1 Ratio" means, as
of any date, the ratio of CET1 Capital
to the Risk Weighted Assets, in
each case as of such date, expressed
as a percentage.
"CET1 Capital" means, as of any
date, the sum, expressed in US dollars,
of all amounts that constitute common
equity tier 1 capital of the Company
together with its subsidiary undertakings
(the "HSBC Group") as of such date,
less any deductions from common
equity tier 1 capital required to
be made as of such date, in each
case as calculated by the Company
on a consolidated basis and without
applying the transitional provisions
set out in Part Ten of the CRR (or
in any successor provisions thereto
or any equivalent provisions of
the Relevant Rules which replace
or supersede such provisions) in
accordance with the Relevant Rules
applicable to the Company as of
such date (which calculation will
be binding on the trustee, the paying
agent and the securityholders).
For the purposes of this definition,
the term "common equity tier 1 capital"
will have the meaning assigned to
such term in CRD IV (as the same
may be amended or replaced from
time to time) as interpreted and
applied in accordance with the Relevant
Rules then applicable to the HSBC
Group or by the PRA (or any successor
entity primarily responsible for
the Company's prudential supervision
(the "Relevant Regulator").
"Risk Weighted Assets" means, as
of any date, the aggregate amount,
expressed in US dollars, of the
risk weighted assets of the HSBC
Group as of such date, as calculated
by the Company on a consolidated
basis and without applying the transitional
provisions set out in Part Ten of
the CRR (or in any successor provisions
thereto or any equivalent provisions
of the Relevant Rules which replace
or supersede such provisions) in
accordance with the Relevant Rules
applicable to the Company as of
such date (which calculation will
be binding on the trustee, the paying
agent and the securityholders).
For the purposes of this definition,
the term "risk weighted assets"
means the risk weighted assets or
total risk exposure amount, as calculated
by the Company in accordance with
the Relevant Rules.
"CRD IV" means, taken together,
(i) the CRR, (ii) the CRD and (iii)
the Capital Instruments Regulations.
"CRR" means regulation (EU) No 575/2013
of the European Parliament and of
the Council of June 26, 2013 on
prudential requirements for credit
institutions and investment firms
and amending regulation (EU) No
648/2012, as amended, supplemented
or replaced from time to time and
(where relevant) any applicable
successor EU or UK legislation.
"CRD" means Directive 2013/36/EU
of the European Parliament and of
the Council of June 26, 2013 on
access to the activity of credit
institutions and the prudential
supervision of credit institutions
and investment firms, amending Directive
2002/87/EC and repealing Directives
2006/48/EC and 2006/49/EC as amended,
supplemented or replaced from time
to time, and (where relevant) any
applicable successor EU or UK legislation.
"Capital Instruments Regulations"
means any regulatory capital rules,
regulations or standards which are
applicable at any time to the Company
(on a solo or consolidated basis
and including any implementation
thereof or supplement thereto by
the UK Prudential Regulation Authority
(or any successor entity) (the "PRA")
from time to time) and which lay
down the requirements to be fulfilled
by financial instruments for inclusion
in the Company's regulatory capital
(on a solo or consolidated basis)
as may be required by (i) the CRR
and/or (ii) the CRD, including (for
the avoidance of doubt) any delegated
acts and implementing acts made
by the European Commission (such
as regulatory technical standards
and implementing technical standards)
and European Banking Authority guidelines
all as amended from time to time
and as implemented in the UK.
"Relevant Rules" means, at any time,
the laws, regulations, requirements,
guidelines and policies relating
to capital adequacy (including,
without limitation, as to leverage)
then in effect in the UK including,
without limitation to the generality
of the foregoing, as may be required
by CRD IV or Directive 2014/59/EU
establishing a framework for the
recovery and resolution of credit
institutions and investment firms,
as amended, supplemented or replaced
from time to time ("BRRD"), or any
applicable successor legislation,
or any delegated or implementing
acts (such as regulatory technical
standards) adopted by the European
Commission and applicable to the
Company from time to time and any
regulations, requirements, guidelines
and policies relating to capital
adequacy adopted by the Relevant
Regulator from time to time (whether
or not such requirements, guidelines
or policies are applied generally
or specifically to the Company or
to the Company and any of the Company's
holding or subsidiary companies
or any subsidiary of any such holding
company).
Conversion shares The Company may elect, at its sole
offer and absolute discretion, that the
Conversion Shares Depository make
an offer of all or some of the Conversion
Shares issued in connection with
the Securities to all or some of
the Company's ordinary shareholders
at a cash price per Conversion Share
equal to the Conversion Shares Offer
Price, subject to certain conditions.
The "Conversion Shares Offer Price"
is fixed initially at GBP2.70 per
Conversion Share and is subject
to certain anti-dilution adjustments
as described below.
Conversion shares "Conversion Shares Offer Consideration"
offer consideration means in respect of each Security
(i) if all the Conversion Shares
are sold in the Conversion Shares
Offer, the pro rata share of the
cash proceeds from such sale in
sterling (the "pro rata cash component"),
(ii) if some but not all of the
Conversion Shares are sold in the
Conversion Shares Offer, (x) the
pro rata cash component and (y)
the pro rata share of the Conversion
Shares not sold pursuant to the
Conversion Shares Offer attributable
to such Security rounded down to
the nearest whole number of Conversion
Shares, and (iii) if no Conversion
Shares are sold in a Conversion
Shares Offer, the relevant Conversion
Shares attributable to such Security
rounded down to the nearest whole
number of Conversion Shares, subject
in the case of (i) and (ii)(x) above
to deduction from any such cash
proceeds of an amount equal to the
pro rata share of any stamp duty,
stamp duty reserve tax, or any other
capital, issue, transfer, registration,
financial transaction or documentary
tax that may arise or be paid as
a consequence of the transfer of
any interest in the Conversion Shares
to the Conversion Shares Depository
(or the relevant recipient in accordance
with the terms of the Securities)
in order for the Conversion Shares
Depository (or the relevant recipient
in accordance with the terms of
the Securities) to conduct the Conversion
Shares Offer.
Adjustments to the The Conversion Price and Conversion
conversion price Shares Offer Price will be adjusted
and the conversion upon the occurrence of the following
shares offer price events: (i) a consolidation, reclassification
or subdivision of the Ordinary Shares,
(ii) an issuance of Ordinary Shares
in certain circumstances by way
of capitalisation of profits or
reserves, (iii) certain issues of
rights for the Ordinary Shares,
(iv) an Extraordinary Dividend or
(v) a Qualifying Takeover Event,
in each case only in the situations
and to the extent provided in the
Securities Indenture.
Adjustments are not required for
every corporate or other event that
may affect the market price of the
Conversion Shares and an Independent
Financial Adviser may make modifications
as it determines to be appropriate.
Optional redemption The Securities will not be redeemable
at the option of the securityholders
at any time. The Securities may
be redeemed in whole (but not in
part) at the option of the Company
in its sole discretion on any Reset
Date at a redemption price equal
to 100% of the principal amount
plus any accrued and unpaid interest
to (but excluding) the date of redemption
(which interest will exclude any
interest that is cancelled or deemed
to have been cancelled), subject
to certain conditions described
in the Securities Indenture.
Special event redemption The Securities may be redeemed in
whole (but not in part) at the option
of the Company in its sole discretion
upon the occurrence of a Tax Event
or a Capital Disqualification Event,
subject to certain conditions described
in the Securities Indenture. In
each case, the redemption price
will be equal to 100% of the principal
amount plus any accrued and unpaid
interest to (but excluding) the
date of redemption (which interest
will exclude any interest that is
cancelled or deemed to have been
cancelled).
A "Tax Event" will be deemed to
have occurred if at any time the
Company determines that certain
detrimental tax events have occurred
(as specified in the Securities
Indenture) as a result of a change
in, or amendment to, the laws of
the UK or any political subdivision
or taxing authority thereof or therein
that has the power to tax, including
any treaty to which the relevant
taxing jurisdiction is a party,
or a change in an official application
or interpretation of those laws
or regulations on or after the Issue
Date, including a decision of any
court or tribunal that becomes effective
on or after the Issue Date.
A "Capital Disqualification Event"
will be deemed to have occurred
if the Company determines, at any
time after the Issue Date, there
is a change in the regulatory classification
of the Securities that results or
will result in either their (i)
exclusion in whole or in part from
the HSBC Group's regulatory capital
(other than as a consequence of
an Automatic Conversion); or (ii)
reclassification in whole or in
part as a form of the HSBC Group's
regulatory capital that is lower
than additional tier 1 capital.
Agreement with respect By its acquisition of the Securities,
to the exercise each securityholder (which, for
of UK bail-in power these purposes, includes each beneficial
owner) will acknowledge, accept,
consent and agree, notwithstanding
any other term of the Securities,
the Securities Indenture, or any
other agreements, arrangements or
understandings between the Company
and any securityholder, to be bound
by (a) the effect of the exercise
of any UK bail-in power by the relevant
UK resolution authority that may
include and result in any of the
following, or some combination thereof:
(i) the reduction of all, or a portion,
of the Amounts Due; (ii) the conversion
of all, or a portion, of the Amounts
Due into the Company's or another
person's ordinary shares, other
securities or other obligations
(and the issue to, or conferral
on, the securityholder of such ordinary
shares, other securities or other
obligations), including by means
of an amendment, modification or
variation of the terms of the Securities
or the Securities Indenture; (iii)
the cancellation of the Securities;
and/or (iv) the amendment or alteration
of the redemption date of the Securities
or amendment of the amount of interest
payable on the Securities, or the
interest payment dates, including
by suspending payment for a temporary
period; and (b) the variation of
the terms of the Securities or the
Indenture, if necessary, to give
effect to the exercise of any UK
bail-in power by the relevant UK
resolution authority. No repayment
or payment of Amounts Due will become
due and payable or be paid after
the exercise of any UK bail-in power
by the relevant UK resolution authority
if and to the extent such amounts
have been reduced, converted, cancelled,
amended or altered as a result of
such exercise. Moreover, each securityholder
(which, for these purposes, includes
each beneficial owner) will consent
to the exercise of any UK bail-in
power as it may be imposed without
any prior notice by the relevant
UK resolution authority of its decision
to exercise such power with respect
to the Securities.
For these purposes, (a) "Amounts
Due" are the principal amount of,
and any accrued but unpaid interest,
including any Additional Amounts
(as defined in the Prospectus Supplement),
on, the Securities. References to
such amounts will include amounts
that have become due and payable,
but which have not been paid, prior
to the exercise of any UK bail-in
power by the relevant UK resolution
authority; (b) a "UK bail-in power"
is any write-down, conversion, transfer,
modification, or suspension power
existing from time to time under,
and exercised in compliance with,
any laws, regulations, rules or
requirements in effect in the UK,
relating to the transposition of
the BRRD or otherwise, including
but not limited to the UK Banking
Act 2009 and the instruments, rules
and standards created thereunder,
pursuant to which (i) any obligation
of a regulated entity (or other
affiliate of such regulated entity)
can be reduced, cancelled, modified,
or converted into shares, other
securities, or other obligations
of such regulated entity or any
other person (or suspended for a
temporary period); and (ii) any
right in a contract governing an
obligation of a regulated entity
may be deemed to have been exercised.
A reference to a "regulated entity"
is to any BRRD Undertaking as such
term is defined under the PRA Rulebook
promulgated by the PRA, as amended
from time to time, which includes
certain credit institutions, investment
firms, and certain of their parent
or holding companies, or any comparable
future definition intended to designate
entities within the scope of the
UK recovery and resolution regime;
and (c) the "relevant UK resolution
authority" is any authority with
the ability to exercise a UK bail-in
power.
Transfers after On the "Suspension Date" (as determined
Suspension Date pursuant to the terms of the Securities
Indenture and which will be no later
than 38 business days after the
delivery of the Company's notice
to the Clearing Systems specifying
whether to conduct the Conversion
Shares Offer), each of the Clearing
Systems will block all positions
relating to the Securities, which
will suspend all clearance and settlement
of transactions in the Securities
through such Clearing System. As
a result, the securityholders will
not be able to settle the transfer
of any Securities through such Clearing
System following the Suspension
Date, and any sale or other transfer
of the Securities that a securityholder
may have initiated prior to the
Suspension Date that is scheduled
to match or settle after the Suspension
Date will be rejected by such Clearing
System and will not be matched or
settled through such Clearing System.
Moreover, the Securities may cease
to be admitted to Euronext Dublin's
Official List and to be traded on
the GEM after the Suspension Date.
"Clearing Systems" means Clearstream
Banking S.A. and Euroclear Bank
SA/NV.
Form and denominations The Securities will be issued in
the form of one or more global securities
registered in the name of the common
depositary for, and deposited with,
Clearstream Banking S.A. and/or
Euroclear Bank SA/NV.
The denominations of the Securities
will be GBP200,000 and integral
multiples of GBP1,000 in excess
thereof.
Status The Securities will constitute the
Company's direct, unsecured and
subordinated obligations, ranking
equally without any preference among
themselves. The Securities will
be subordinated to the claims of
Senior Creditors.
"Senior Creditors" means the Company's
creditors (i) who are unsubordinated
creditors; (ii) whose claims are,
or are expressed to be, subordinated
to the claims of the Company's unsubordinated
creditors but not further or otherwise;
or (iii) whose claims are, or are
expressed to be, junior to the claims
of the Company's other creditors,
whether subordinated or unsubordinated,
other than those whose claims rank,
or are expressed to rank, pari passu
with, or junior to, the claims of
the securityholders in a winding-up
occurring prior to a Capital Adequacy
Trigger Event. For the avoidance
of doubt, holders of any of the
Company's existing or future Tier
2 capital instruments will be Senior
Creditors.
Listing Application is expected to be made
to Euronext Dublin for the Securities
to be admitted to the Official List
and to trading on the GEM. The GEM
is not a regulated market for the
purpose of the Directive 2014/65/EU.
Waiver granted by the SEHK and specific mandate for the issuance
of the Securities
The Company announced on 5 March 2018 that it had applied for,
and the SEHK had granted, a waiver from strict compliance with the
requirements of Rule 13.36(1) of the Hong Kong Listing Rules
pursuant to which the Company was permitted to seek (and, if
approved, utilise) an authority (the "Mandate") to issue Contingent
Convertible Securities ("CCSs") (and to allot Ordinary Shares into
which they may be converted or exchanged) in excess of the limit of
the general mandate of 20% of the Company's issued share
capital.
At the 2018 annual general meeting of the Company held on 20
April 2018, the shareholders of the Company approved the Mandate
allowing the Company to allot Ordinary Shares or grant rights to
subscribe for, or to convert any security into, Ordinary Shares in
connection with the issue of CCSs up to an aggregate nominal amount
of US$1,999,610,418, equivalent to approximately 20% of the
Company's issued ordinary share capital as at 20 February 2018
without first offering them to existing shareholders. The Mandate
is effective until the Company's annual general meeting in 2019 or
the close of business on 30 June 2019, whichever is the earlier,
and is in addition to any general mandate granted by the
shareholders at any annual general meeting of the Company to allot
Ordinary Shares (for example, in the 2018 annual general meeting,
the Company sought, and received from shareholders, a separate
authority to allot new Ordinary Shares (or rights to Ordinary
Shares) of up to an aggregate nominal amount of US$6,665,368,060,
representing approximately two-thirds of the Company's issued
ordinary share capital in total as at 20 February 2018, subject to
certain limitations as described in the notice of the 2018 annual
general meeting of the Company dated 7 March 2018). For further
details, please refer to the notice of the 2018 annual general
meeting of the Company dated 7 March 2018 and the announcement of
the Company dated 20 April 2018 disclosing the poll results of such
meeting.
As of the date of this announcement, the aggregate nominal
amount of the Ordinary Shares which may be issued upon conversion
of all the CCSs issued by the Company prior to the date of this
announcement pursuant to and out of the Mandate (assuming there is
no adjustment to the Conversion Price) (including the Singapore
Dollar Issuance, as defined below) is US$77,149,699, with a
remaining headroom under the Mandate of US$1,922,460,719. Assuming
that there is no adjustment to the Conversion Price for the
Securities, the aggregate nominal amount of the Ordinary Shares
which may be issued upon conversion of all the Securities is
US$185,185,185 (or up to US$203,703,703.50 if the Managers'
over-allotment option is exercised in full). Accordingly, the
Securities are being issued pursuant to and out of the Mandate and
the issuance of the Securities is not subject to approval by the
shareholders of the Company.
Application for listing
If a Capital Adequacy Trigger Event occurs, and Ordinary Shares
are issued pursuant to the conversion of the Securities,
application will be made by the Company to (i) the UK Listing
Authority and to the London Stock Exchange for the Ordinary Shares
to be admitted to the Official List and to trading respectively,
(ii) the SEHK for the listing of, and permission to deal in, the
Ordinary Shares, and (iii) the New York, Paris and Bermuda stock
exchanges for listing of the Ordinary Shares.
Reasons for the issuance of the Securities and use of
proceeds
The Company intends to use the net proceeds from the sale of the
Securities for general corporate purposes and to further strengthen
the Company's capital base pursuant to requirements under CRD
IV.
The aggregate gross proceeds from the issuance of the Securities
are expected to be GBP1,000,000,000 (or up to GBP1,100,000,000 if
the Managers' over-allotment option is exercised in full). The net
proceeds from the issuance of the Securities, after the deduction
of the commission to the Managers, are expected to be
GBP990,000,000 (or up to GBP1,089,000,000 if the Managers'
over-allotment option is exercised in full).
Fund raising activities in the past 12 months
The Company has not carried out any issue of equity securities
during the 12 months immediately preceding the date of this
announcement, save and except:
(1) the issue of Ordinary Shares by the Company pursuant to the Scrip Dividend Scheme;
(2) the Issuances of Ordinary Shares to Employees;
(3) the issue of the US$2,350,000,000 6.250% Perpetual
Subordinated Contingent Convertible Securities as disclosed in the
announcements of the Company dated 20 March 2018 and 23 March 2018,
which are available on the Company's website. The proceeds for such
securities were intended to be used for general corporate purposes
and to further strengthen the Company's capital base pursuant to
requirements under CRD IV, and they have been applied in full as
intended;
(4) the issue of the US$1,800,000,000 6.500% Perpetual
Subordinated Contingent Convertible Securities as disclosed in the
announcements of the Company dated 20 March 2018 and 23 March 2018,
which are available on the Company's website. The proceeds for such
securities were intended to be used for general corporate purposes
and to further strengthen the Company's capital base pursuant to
requirements under CRD IV, and they have been applied in full as
intended; and
(5) the expected issue of the S$750,000,000 5.000% Perpetual
Subordinated Contingent Convertible Securities, which transaction
is expected to settle on 24 September 2018 (the "Singapore Dollar
Issuance") as disclosed in the announcement of the Company dated 20
September 2018, which is available on the Company's website. The
proceeds for such securities are intended to be used for general
corporate purposes and to further strengthen the Company's capital
base pursuant to requirements under CRD IV.
For these purposes, "Scrip Dividend Scheme" means the scrip
alternative scheme of the Company for shareholders of the Company
to elect to receive dividends wholly or partly in the form of new
fully-paid Ordinary Shares instead of in cash, and "Issuances of
Ordinary Shares to Employees" means the issuances by the Company of
Ordinary Shares to certain of its directors and employees pursuant
to or in connection with the grant of share awards, share option
schemes, or share saving schemes of the Company.
Effects on shareholding structure of the Company
In the event an Automatic Conversion occurs,
(1) assuming full conversion of the Securities (but assuming
none of the Over-allotment Securities are issued) at the initial
Conversion Price takes place, the Securities will be convertible
into approximately 370,370,370 Ordinary Shares representing, as at
17 September 2018, approximately 1.86% of the issued share capital
of the Company and approximately 1.83% of the issued share capital
of the Company as enlarged by the issue of such Conversion Shares;
or
(2) assuming full conversion of the Securities (and assuming all
of the Over-allotment Securities are issued) at the initial
Conversion Price takes place, the Securities (including all
Over-allotment Securities) will be convertible into approximately
407,407,407 Ordinary Shares representing, as at 17 September 2018,
approximately 2.05% of the issued share capital of the Company and
approximately 2.01% of the issued share capital of the Company as
enlarged by the issue of such Conversion Shares.
The Conversion Shares issued following an Automatic Conversion
will in all respects rank pari passu with the fully paid Ordinary
Shares in issue on the Conversion Date, except in any such case for
any right excluded by mandatory provisions of applicable law, and
except that the Conversion Shares so issued will not rank for (or,
as the case may be, the relevant securityholder will not be
entitled to receive) any rights, distributions or payments, the
entitlement to which falls prior to the Conversion Date.
The following table summarises the potential effects on the
shareholding structure of the Company as a result of the issuance
of the Securities and the Over-allotment Securities (by reference
to the information on shareholdings as at 17 September 2018 (being
the latest practicable date prior to the release of this
announcement) and in each case assuming: (a) full conversion of the
Securities, assuming no Over-allotment Securities have been issued;
and (b) full conversion of the Securities, assuming all
Over-allotment Securities have been issued):
(a) Assuming the Securities (b) Assuming the
(excluding the Over-allotment Securities (including
As at 17 September Securities) are fully all Over-allotment
2018 converted into Ordinary Securities) are
Shares at the initial fully converted
Conversion Price into Ordinary Shares
at the initial Conversion
Price
------------------------------ ------------------------------- --------------------------------
Name of Number of % of total Number of % of the Number of % of the
Shareholders Ordinary issued Ordinary enlarged Ordinary enlarged
Shares Ordinary Shares issued Shares issued
Shares Ordinary Ordinary
Shares Shares
----------------- --------------- ------------- ---------------- ------------- ----------------- -----------
Ping An
Asset
Management
Co., Ltd.
(Note 1) 1,253,254,972 6.29 1,253,254,972 6.18 1,253,254,972 6.17
BlackRock,
Inc. (Note
2) 1,335,163,793 6.71 1,335,163,793 6.58 1,335,163,793 6.57
Subscribers
of the
Securities 0 0.00 370,370,370 1.83 407,407,407 2.01
Other public
Shareholders 17,318,365,788 87.00 17,318,365,788 85.41 17,318,365,788 85.25
Total Issued
Ordinary
Shares 19,906,784,553 100.00 20,277,154,923 100.00 20,314,191,960 100.00
Note:
1. Based on a disclosure of interest filing made by Ping An
Asset Management Co., Ltd on 13 February 2018, as per the long
position as at 9 February 2018.
2. Based on a disclosure of interest filing made by BlackRock,
Inc. on 22 August 2018, as per the long position as at 17 August
2018.
3. The information in the above table is for illustrative
purposes only, and it only shows the potential effects on the
shareholding structure of the Company in connection with the
Securities (but not any other securities issued or to be issued by
the Company). The number of Ordinary Shares shown for holders of
the Securities relates only to those Ordinary Shares that are or
will be held by them as a result of their holding the
Securities.
Investor enquiries to:
UK - Greg Case Tel: +44 (0) 20 7992
3825
Hong Kong - Hugh Pye Tel: +852 2822 4908
Media enquiries to:
UK - Ankit Patel Tel: +44 (0) 20 7991
9813
HK - Vinh Tran Tel: +852 2822 4924
Disclaimers
The distribution of this announcement in certain jurisdictions
may be restricted by law. Persons into whose possession this
announcement comes are required to inform themselves about and to
observe any such restrictions.
This announcement does not constitute an offer or an invitation
to subscribe or purchase any of the Securities. No action has been
taken in any jurisdiction to permit a public offering of the
Securities where such action is required other than in the US. The
offer and sale of the Securities may be restricted by law in
certain jurisdictions.
The Securities are complex financial instruments and are not a
suitable or appropriate investment for all investors. In some
jurisdictions, regulatory authorities have adopted or published
laws, regulations or guidance with respect to the offer or sale of
securities such as the Securities to retail investors. In
particular, in June 2015, the UK Financial Conduct Authority (the
"FCA") published the Product Intervention (Contingent Convertible
Instruments and Mutual Society Shares) Instrument 2015, which set
out certain rules and took effect from 1 October 2015 (the "PI
Rules"). In addition, (i) on 1 January 2018, the provisions of
Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation")
on key information documents for packaged retail and
insurance-based investment products became directly applicable in
all European Economic Area ("EEA") member states and (ii) MiFID II
was required to be implemented in EEA member states by 3 January
2018. Together, the PI Rules, the PRIIPs Regulation and Directive
2014/65/EU (as amended, "MiFID II") are referred to as the
"Regulations".
The Regulations set out various obligations in relation to (i)
the manufacturing and distribution of financial instruments and
(ii) the offering, sale and distribution of packaged retail and
insurance-based investment products and certain contingent
write-down or convertible securities, such as the Securities.
Potential investors should inform themselves of, and comply
with, any applicable laws, regulations or regulatory guidance with
respect to any resale of the Securities (or any beneficial
interests therein), including the Regulations.
The Company and some or all of the Managers are required to
comply with the Regulations. By purchasing, or making or accepting
an offer to purchase (including by an indication of interest), any
Securities (or a beneficial interest in such Securities) from the
Company and/or the Managers, each prospective investor represents,
warrants, agrees with and undertakes to the Company and its
affiliates and each of the Managers and their affiliates that:
(1) it is not a retail investor in the EEA;
(2) it will not (A) sell, offer or recommend the Securities (or
any beneficial interest therein) or otherwise make them available
to retail investors in the EEA or (B) communicate (including the
distribution of the Prospectus or the Prospectus Supplement) or
approve an invitation or inducement to participate in, acquire or
underwrite the Securities (or any beneficial interests therein)
where that invitation or inducement is addressed to or disseminated
in such a way that it is likely to be received by a retail investor
in the EEA; and
(3) it will at all times comply with all applicable laws,
regulations and regulatory guidance (whether inside or outside the
EEA) relating to the promotion, offering, distribution and/or sale
of the Securities (or any beneficial interests therein), including
(without limitation) any such applicable laws, regulations and
regulatory guidance relating to determining the appropriateness
and/or suitability of an investment in the Securities (or any
beneficial interests therein) by investors in any relevant
jurisdiction, having regard to the target market assessment for the
Securities.
For these purposes, a "retail investor" means a person who is
one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of MiFID II; or (ii) a customer within the meaning of
Directive 2002/92/EC (as amended, the "IMD"), where that customer
would not qualify as a professional client as defined in point (10)
of Article 4(1) of MiFID II.
Where acting as agent on behalf of a disclosed or undisclosed
client when purchasing, or making or accepting an offer to
purchase, any Securities (or any beneficial interests therein) from
the Company and/or the Managers the foregoing representations,
warranties, agreements and undertakings will be given by and be
binding upon both the agent and its underlying client. For the
avoidance of doubt, the restrictions described above do not affect
the distribution of the Securities in jurisdictions outside the
EEA, such as the US, provided that any distribution into the EEA
complies with the PI Rules.
The Securities are not intended to be offered, sold or otherwise
made available to and should not be offered, sold or otherwise made
available to any retail investor in the EEA. For these purposes, a
retail investor means a person who is one (or more) of: (i) a
retail client as defined in point (11) of Article 4(1) of MiFID II;
or (ii) a customer within the meaning of the IMD, where that
customer would not qualify as a professional client as defined in
point (10) of Article 4(1) of MiFID II. Consequently, no key
information document required by the PRIIPs Regulation for offering
or selling the Securities or otherwise making them available to
retail investors in the EEA has been prepared and therefore
offering or selling the Securities or otherwise making them
available to any retail investor in the EEA may be unlawful under
the PRIIPs Regulation. The expression "Prospectus Directive" means
Directive 2003/71/EC (and amendments thereto, including Directive
2010/73/EU), and includes any relevant implementing measure in any
Member State.
For and on behalf of
HSBC Holdings plc
B J S Mathews
Group Company Secretary
Notes to editors:
1. HSBC Holdings plc
HSBC Holdings plc, the parent company of the HSBC Group, is
headquartered in London. The Group serves customers worldwide from
around 3,800 offices in 66 countries and territories in Europe,
Asia, North and Latin America, and Middle East and North Africa.
With assets of US$2,607bn at 30 June 2018, HSBC is one of the
world's largest banking and financial services organisations.
2. The Board of Directors of HSBC Holdings plc as at the date of
this announcement is:
Mark Tucker*, John Flint, Kathleen Casey , Laura Cha , Henri de
Castries , Lord Evans of Weardale , Irene Lee , Iain Mackay, Heidi
Miller , Marc Moses, David Nish , Jonathan Symonds , Jackson Tai
and Pauline van der Meer Mohr .
* Non-executive Group Chairman
Independent non-executive Director
ends/all
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCEFLBLVKFXBBV
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