HQ strengthens its capital base by selling HQ Fonder to Öresund for SEK 850 million

HQ strengthens its capital base by selling HQ Fonder to Öresund for SEK
850 million

HQ simultaneously withdraws the proposed rights issue of SEK 559 million
and cancels the extraordinary general meeting of June 28, 2010. Instead
HQ intends to conduct a rights issue of up to SEK 1,000 million to make
possible a re-purchase of HQ Fonder and assure financial stability


  · In order to be able to expeditiously conduct an accelerated closure
of the Trading operations there is a requirement to immediately
strengthen the capital base. Thus far during the second quarter of 2010,
the loss within the Trading operations amounts to SEK 297 million. The
cost of conducting the accelerated closure is believed to have
increased, and will arise earlier, than in HQ's estimate as of May 26,
2010.

  · HQ AB (publ) (”HQ” or the ”Company”) has therefore decided to sell
its subsidiary HQ Fonder Sverige AB (”HQ Fonder”) to Investment AB
Öresund (publ) (”Öresund”) to immediately strengthen its capital base,
in order to increase flexibility until a rights issue is conducted. The
sale shall be approved by an extraordinary general meeting. HQ has an
option that allows it to re-purchase HQ Fonder at similar terms.

  · The acquisition price amounts to SEK 850 million, which will
strengthen HQ's Tier 1 capital by approximately SEK 700 million. This
will immediately create the financial conditions to conduct the
previously announced accelerated closure of HQ's Trading operations with
freedom of action.

  · The sale of HQ Fonder will strengthen HQ's Tier 1 capital ratio pro
forma per March 31, 2010 from 15.5 percent to 26.9 percent and its
capital adequacy from 17.5 percent to 28.9 percent.[1]

  · The proposed rights issue of SEK 559 million is hereby withdrawn and
the extraordinary general meeting of June 28, 2010 is therefore
cancelled. The board intends instead to decide - on condition of
approval by the later extra extraordinary general meeting - on a issue
of up to SEK 1,000 million in common stock with preferential rights for
existing shareholders (the ”Rights Issue”), with a customary issue
discount.

  · The Rights Issue is being conducted in order to enable a re-purchase
of HQ Fonder and assure financial stability.

  · The board will announce an extraordinary general meeting to seek
approval for the transfer of HQ Fonder and approval for the Rights
Issue. It is intended that the extraordinary general meeting be held in
September 2010.

  · The Rights Issue is already largely secured through separate
subscription obligations and guarantee undertakings from Öresund, Mats
Qviberg (including family) and Sten Dybeck (including family) up to an
amount of SEK 715 million. These shareholders, which together own 35.6
percent of the total number of issued shares in HQ, have also committed
to voting in favour of the Rights Issue at the extraordinary general
meeting.

 

Background and reasons

On May 26, 2010, HQ announced a rights issue of SEK 559 million to
strengthen its capital base due to estimated losses in conjunction with
the intended accelerated closure of the Trading operations. The
magnitude of the losses in conjunction with the closure has been
difficult to assess. Thus far during the second quarter, the loss within
the Trading operations amounts to SEK 297 million. The cost of
conducting the accelerated closure is believed to have increased, and
will arise earlier, than in HQ's estimate as of May 26, 2010.

In accordance with the applicable capital adequacy regulations, HQ must
inter alia always meet a particular capital requirement. The planned
accelerated closure could mean the occurrence of a shortfall in the
capital base until receipt of the settlement for the rights issue. In
order to immediately strengthen the Company's capital base, the board
has therefore decided to sell the subsidiary HQ Fonder to Öresund for
SEK 850 million. Öresund will take over HQ Fonder on June 8, 2010. HQ
has an option that allows HQ to re-purchase HQ Fonder, at similar terms
to the sale. The option can be exercised from June 8, 2010 up to and
including March 31, 2011. The re-purchase price amounts to SEK 850
million plus HQ Fonder's accumulated net profit from July 1, 2010. The
board of HQ will commission an independent valuation opinion regarding
the purchase settlement for HQ Fonder, a so-called ”fairness opinion”,
that will be presented at the extraordinary general meeting.

The sale of HQ Fonder will strengthen HQ's Tier 1 capital ratio pro
forma per March 31, 2010 from 15.5 percent to 26.9 percent and its
capital adequacy from 17.5 percent to 28.9 percent.[2]

The sale of HQ Fonder generates a capital gain for the HQ group of SEK
244 million, corresponding to 8.7 SEK per share. The sale also leads to
that HQ's profit per share decreases by 2.4 SEK, based on the
twelve-month period from April 1, 2009 - March 31, 2010.

The board of HQ has also decided to withdraw the proposed rights issue
of SEK 559 million that was announced on May 26, 2010 and cancel the
extraordinary general meeting of June 28, 2010. HQ intends to instead
conduct an issue of common stock with preferential rights for existing
shareholders of up to SEK 1,000 million, before issue related costs.

The Rights Issue is being conducted in order to make possible a
re-purchase of HQ Fonder and to assure financial stability.

HQ Fonder in brief

HQ Fonder is a leading independent Swedish mutual fund company with
operations comprising the management and sale of mutual fund units in
Sweden. In addition, sales take place through HQ Private Banking and via
external distributors in Sweden and abroad. The company has a stable
fund management organisation with longstanding experience and good
performance. The fund management is primarily focused on Swedish
equities and fixed income and equities in different emerging markets.
Established cooperation with HQ Bank regarding, for example,
distribution will continue as previously.

Assets under management per March 31, 2010 was SEK 29.9 billion
distributed among approximately 23,000 directly registered clients,
which corresponds to 32 percent of total assets under management in HQ.
HQ Fonder manages a total of 25 mutual funds, of which 19 in HQ Fonder
Sverige AB, and of these are four so called exchange-traded funds. The
remaining six funds are administered by SEB Fund Services S.A. in
Luxembourg. The company has 28 employees.

HQ Fonder reported during the twelve-month period April 1, 2009-March
31, 2010 revenues of SEK 170 million (excluding non-recurring effects of
SEK 40 million) and operating profit of SEK 89 million (excluding
non-recurring effects of SEK 40 million), which corresponds to 21
percent of the revenues and 38 percent of the operating profit of HQ
excluding the Trading operations. Shareholders' equity in HQ Fonder as
of March 31, 2010 was SEK 140 million.

Indicative terms for the Rights Issue

The board of HQ intends to decide - on condition of approval by the
extra extraordinary general meeting - on a rights issue of common stock
of up to SEK 1,000 million. Shareholders of HQ will have preferential
rights to subscribe for the new shares in relation to the number of
existing shares they own at a customary issue discount. The magnitude of
the increase in share capital, the number of common shares to be issued
and the subscription price for the new shares in the Rights Issue are
expected to be announced by the board not later than two days before the
date of the extraordinary general meeting.

The new common stock will confer the same rights as the existing common
stock, including the right to future dividends and other distributions
decided upon or paid out subsequent to the allocation and registration
of the new common stock.

Subscription obligations and issue guarantees

The Rights Issue is already largely secured through separate
subscription obligations and guarantee undertakings by some of the
Company's largest shareholders Öresund, Mats Qviberg (including family),
and Sten Dybeck (including family) up to an amount of SEK 715 million.
These shareholders, which together own 35.6 percent of the total number
of issued shares in HQ, have also committed to voting in favour of the
Rights Issue at the extraordinary general meeting. The subscription
obligations and issue guarantees are subject to the customary terms and
conditions for this type of transaction. Considering its current
ownership of HQ, Öresund intends to seek dispensation from the
compulsory bid obligation that may arise if Öresund's ownership in HQ
exceeds 30 percent of the votes due to its guarantee undertaking.

Extraordinary general meeting

It is intended that the board's decision to sell HQ Fonder and decision
to conduct the Rights Issue and necessary changes to the articles of
association as a consequence of the Rights Issue be approved by an
extraordinary general meeting. It is intended that the extraordinary
general meeting be held in September 2010.

The shareholders Öresund, Mats Qviberg (including family) and Sten
Dybeck (including family), that together hold 35.6 percent of both
capital and votes in the Company have committed to voting in favour of
approval of the board's decision regarding the Rights Issue etc at the
extraordinary general meeting.

Miscellaneous

Lenner & Partners and HQ Bank Corporate Finance are financial advisors
and Setterwalls Advokatbyrå and Bergh & Co are legal advisors to HQ.

For further information:
Mats Qviberg, Chairman HQ, tel: +46 (0)8 696 17 00
Stefan Dahlbo, Acting President and CEO HQ, tel: +46 (0)8 696 17 00
Mikael Nachemson, Chairman HQ Bank, tel: +46 (0)8 696 17 00

Media enquiries:
Erik Amcoff, Head of Corporate Communications HQ, tel +46 (0)730 891 761

 

HQ Bank explores, innovates and performs in order to improve wealth and
deliver financial success.

HQ Bank conducts business operations in the areas of Asset Management,
Private Banking and Investment Banking.

HQ Bank is represented in six locations in Sweden and its head office is
in Stockholm.

The parent company HQ AB is listed on the Swedish Mid Cap list of the
OMX Nordic Exchange Stockholm (HQ).

The above information is information that HQ AB (publ) is obliged to
publish in accordance with the Swedish Securities Market Act and/or the
Swedish Financial Instruments Trading Act. This information was
disclosed to the market for publication at 08.00 on June 08, 2010.

[1] Pro forma figures are based on the capital situation per March 31,
2010 adjusted for the sale of HQ Fonder and trading losses thus far
during the second quarter of SEK 297 million.

[2] Pro forma figures are based on the capital situation per March 31,
2010 adjusted for the sale of HQ Fonder and trading losses thus far
during the second quarter of SEK 297 million.