EFTA02502090

From: David Stern Sent: Friday, May 8, 2015 3:09 PM To: jeffrey E. Subject: Fwd: Fyi only Fw. Pioneer structure Here is a structuring challenge for you ! Just for some brain =ork to entertain you: Begin forwarded =essage: The convertible route =oes not seem to work. As explained previously, in order for the =onvertible to qualify as All capital, the convertible will have to be =tructured in a way that the bank for any and no reason can cancel the =oupon in its own discretion. Furthermore, the bank will only have to =ay the coupon out of profits. We therefore proposed =n indemnity by the parent to make up for any shortfall if the bank does =ot pay the full coupon. However, Slaughters and A&O now agree that =his indemnity will likely destroy the All classification of the =onvertible. I spoke to JM and he is currently exploring some =lternative structures with the bank's lawyers. As previously =iscussed, one structure could be that KB Holdings issues an =xchangeable loan and uses the GBP 8m proceeds to subscribe for ordinary =hare in KBBL. The subscription monies will then qualify as common =quity tier 1 (CET].) which is even better than AT1.. At the end of the 3 =ears KB Holdings repays the principal and the coupon of the =xchangeable in shares of KBBL. There may be some other =tructures which JM is currently exploring. The fact that the PRA =eeting has been pushed back also gives us a little more breathing space =n this regard. I will let you know as soon as I have some concrete =roposals. Please feel free to call me if you would like to =iscuss. All the best M 1 EFTA_R1_01630187 EFTA02502090