BCV's Recapitalization

Terms of the Participation Certificate Issue

Tomorrow, the shareholders of BCV will be officially invited to the Extraordinary General Meeting of the Shareholders (EGM) scheduled for 5 February 2003. As previously announced, the Board will submit to the EGM a proposal that the par value of registered BCV shares be reduced from CHF 125.- to CHF 62.50 in order to increase the Bank's reserves. The Board will also ask the EGM to approve a simultaneous capital increase, to be effected by issuing 13,586,956 participation (dividend-right) certificates with a par value of CHF 62.50 and an issue price of CHF 92.-. Reducing the par value of the BCV share will allow the Bank to set the same par value for the participation certificates as for the shares, and to issue the certificates at a price that is in line with the current market price of the shares.

These operations are necessary in order to increase provisions and valuation adjustments by CHF 850 mn, thus providing BCV with the means to manage the risks entailed by its various activities. Total provisions and valuation adjustments of BCV Group will amount to CHF 2.5 bn once these proposals are implemented. In addition, BCV must increase its shareholders' equity in order to reach a level exceeding 120% of Swiss regulations in this area, and thereby fulfill the requirements of the Swiss Federal Banking Commission (CFB). BCV's shareholders' equity will stand at over CHF 2.3 bn after the proposed operations.

The participation certificates issue is planned for after the EGM, and current shareholders will be offered the opportunity to subscribe for the certificates issued. The participation certificates' non-cumulative preferred dividend rate will be set by adding a premium of 0.7% to the annual rate paid on Swiss Confederation 10-year government bonds, with a cap set at 5% of issue price. This dividend rate-setting method is designed to take account of the re-financing costs incurred by Vaud Canton in this operation.

The planned dividend of CHF 3.33 for 2003, provided that the Bank's results are sufficient, will be equivalent to 3.62% of the certificates' issue price, keeping in mind that the certificates will be fully paid up only at the end of February 2003.

Having opted for an issue of non-voting participation certificates has the advantage that Vaud Canton can undertake to subscribe the entire issue, if necessary, without increasing its stake in BCV's share capital and without undermining the voting power of the other shareholders by increasing its own. The Canton has promised to subscribe the entire number of certificates corresponding to its current stake in BCV, as well as any certificates left un-subscribed by other shareholders.

Lausanne, 14 January 2003

Contact(s)

Daniel Herrera, Head of Communications
Phone +41 844 228 228
E-mail