Aegon announces consent solicitation to amend coupon calculation on USD Perpetual Capital Securities - Seite 2

Details of the consent solicitation
The proposed changes are limited to the interest rate provisions within the terms of the Securities and are aimed at remediating the embedded LIBOR coupon and introducing updated fallback provisions. The ARRC has published recommendations in relation to the substitution of LIBOR-referencing swap rates. The ARRC recommendation advocates calculation of the replacement rate by application of a sophisticated formula based on SOFR-referencing swap rates with some technical adjustments to account for differences in payment frequency and day count conventions, with a variable spread adjustment. Aegon is proposing to apply a simplified approach using the ARRC formula, which would result in a fixed spread adjustment rather than a variable spread adjustment per quarter. This simplified approach derives the spread adjustment for moving from a 10-year LIBOR-referencing swap rate to a 10-year SOFR-referencing swap rate as of242 March 31, 2023.

The proposed methodology is considered by Aegon as appropriate to achieve an economically neutral outcome, considering various factors including, but not limited to, general industry and market feedback for the active transition of USD LIBOR-referencing securities. Aegon has considered exercising the call option available in the terms of the Securities but has concluded that this would not be in the economic interest of the company.

Spread adjustment and new floating rate coupon
Based on the 10-year SOFR -referencing swap rate of 3.242 per cent. on March 31, 2023, the proposed spread adjustment is 0.28753 per cent. In the opinion of Aegon, the proposed approach should provide a beneficial outcome for holders of the Securities compared to applying the specific formula recommended by the ARRC. The ARRC approach would lead to a variable spread depending on the 10-year SOFR -referencing swap rate, with a maximum spread adjustment of 0.28767 per cent. for a swap rate of 3.01 per cent.

The simplified approach to calculate the spread adjustment effectively fixes the spread adjustment close to the maximum spread under the ARRC approach. In case the eligible holders consent to the proposed modifications, the Securities will have a quarterly floating rate coupon equal to the 10-year SOFR ISR plus 0.38753 per cent (the sum of the original credit spread and the spread adjustment), subject to an 8.5 per cent maximum.