Issue of CCDS

 

Nationwide Building Society

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

6 September 2017

NATIONWIDE BUILDING SOCIETY ANNOUNCES OFFER OF FURTHER CORE CAPITAL DEFERRED SHARES

Nationwide Building Society ("Nationwide" or the "Society") is today announcing a further offer (the "Offer") of its Core Capital Deferred Shares ("CCDS"), to be consolidated and form a single series upon issue with its 5,500,000 CCDS issued on 6 December 2013.

Background and Rationale for Offer

In common with other financial institutions, the Society is required by law to maintain certain levels of capital to absorb losses. The Society's regulatory capital mainly comprises retained profit which has been built up over many years (Nationwide has made an annual profit for over 95 years). From time to time, this has been supplemented by issuing capital instruments to external investors, including permanent interest bearing shares ("PIBS"), additional tier 1 instruments, tier 2 instruments and, in 2013, the existing CCDS. CCDS constitute Common Equity Tier 1 ("CET1") capital - the highest quality form of capital available to building societies.

Nationwide's capital position is stable and the Society is well capitalised, both in absolute terms and relative to current and foreseeable requirements. The Society's reasons for proposing to issue further CCDS at this time are to re-affirm the relevance to the Society of CCDS, to demonstrate its continued access to inorganic CET1 capital and to seek to increase the liquidity of its CCDS. It does not indicate any intention to enter into any acquisition, merger or similar transaction. Whilst Nationwide does not need to issue the further CCDS to meet its regulatory capital requirements, the issuance will further bolster the Society's CET1 capital, helping to support its strategic growth ambitions and to maintain its capital at prudent levels having regard to its present and anticipated future capital requirements.

Mark Rennison, Nationwide's Chief Financial Officer, said:

"Nationwide's capital position remains well in excess of regulatory requirements with a common equity tier 1 ratio of 25.4 per cent. and a UK leverage ratio of 4.4 per cent. as at 4 April 2017. The Board believes the Society is well capitalised to continue to deliver its strategy over the short, medium and long term.

"As a building society, the main component of our core capital is, and will remain, retained earnings built up over many years. However, CCDS are strategically important for Nationwide as they provide an additional source of capital to support the Society's long term strategic growth and provide safety and security for our members' money. Given current market conditions, we believe now is a good time to offer these further CCDS as part of our strategy both to maintain broad access to capital markets and also to develop capacity and liquidity in the CCDS market specifically. This is particularly relevant given that Nationwide has been the only issuer of CCDS since they were introduced in 2013 as an additional source of capital for building societies."

Key highlights of the Offer

·    Issuer: Nationwide Building Society

·    Instrument: fully paid up, irredeemable CCDS

·    Offer size: Nationwide is targeting an issue of up to approximately 5,000,000 further CCDS (assuming no exercise of the over-allotment option)

·    Over-allotment option: up to 15%

·    Consolidation with existing CCDS: the further CCDS will upon issue be consolidated and form a single series with the Society's 5,500,000 existing CCDS

·    Minimum investment: investors wishing to participate in the Offer will be required to invest a minimum total consideration of approximately £200,000

·    Minimum transfer amount (relevant to secondary trading): 250 CCDS

·    Maturity date: perpetual

·    Status: most junior investment in the Society, ranking junior to all creditors, including subordinated creditors and the holders of the Society's additional tier 1 securities and PIBS. Claim in a winding-up is for a capped share of surplus assets (if any), calculated by reference to specific formulae under the terms of the CCDS

·    Regulatory treatment: CET1 capital

·    Distributions: fully discretionary, non-cumulative and capped in accordance with the Rules of the Society. The prevailing Cap, applicable in respect of the financial year to 4 April 2017, is £15.67, and such cap is adjusted for inflation by reference to the UK CPI each year

·    Distribution payment dates: 20 December in the case of any interim distribution and 20 June in the case of any final distribution or, if either such date is not a business day, on the immediately following business day

·    Entitlement to distributions: the first potential distribution payment date following the Offer is 20 December 2017. If the Society elects to declare an interim distribution on the CCDS for payment in December 2017, investors in the further CCDS will (provided they continue to hold their further CCDS at close of business on the relevant record date) be entitled to receive such distribution in full

·    Distribution Policy: the Board of the Society maintains a distribution policy outlining its expectations for future interim and final distributions in £ per CCDS. The full distribution policy is available on the Society's website. Taking into account the policy, the Board is currently targeting an interim distribution of £5.125 per CCDS for payment in December 2017 and a final distribution of £5.125 per CCDS for payment in June 2018. Distributions are discretionary, and the Board is entitled to amend its distribution policy, or depart from it, at any time. However, the Society intends to maintain a stable distribution policy, subject to such factors as the Board deems relevant, including (but not limited to) factors specified in the published distribution policy

·    Member Voting Rights: single vote at general meetings ('one member one vote'). The member vote will be attributable to the nominee of the Clearing Systems (as registered holder), and the nominee has confirmed to the Society that it does not intend to exercise its vote

·    Residual claim in liquidation: claim per CCDS on the surplus assets of the Society upon its liquidation or dissolution is capped at the lesser of (a) the Core Capital Contribution Share and (b) the Average Principal Amount (see the terms of the CCDS)

·    Listing: Standard Equity Listing on the London Stock Exchange and subject to the rules of the Exchange and trading restriction on outright short positions as applicable consequent on such a listing

·    Lock-up: the Society has agreed to certain lock-up arrangements, including not to, for a period of 45 days following Admission, issue or dispose of any CCDS

The Offer, which is being made on a non-pre-emptive basis, will be made available to certain institutional and professional investors in the United Kingdom and elsewhere outside the United States in reliance on Regulation S under the US Securities Act of 1933, and is subject to offer and distribution restrictions (see "Offer and Distribution Restrictions" below). Allocations will be made in accordance with customary allocation processes and procedures and in accordance with applicable law and regulation. Final allocations under the Offer will be determined by the Society having regard to a range of factors, including, inter alia, the level and nature of demand for the further CCDS in the Offer and the objective of continuing an orderly and liquid after-market in the CCDS. In addition, in making any final determination of allocations in respect of the further CCDS, the Society shall be entitled (but not obliged) to take into account any current holding of existing CCDS by investors who express an interest in purchasing further CCDS pursuant to the Offer.

The issue price of the further CCDS will be determined following a book-building exercise currently expected to conclude tomorrow. In order to assist prospective investors in their assessment of the Offer, the issue price of the further CCDS will be exclusive of any amount attributable to potential future distributions and, in line with market convention for secondary market trading, the final price payable by investors will also include an amount attributable to potential future distributions. However, investors should note that the CCDS are CET1 instruments and the Society has full discretion whether or not to declare distributions (in contrast to interest on a debt instrument, there is no actual accrual of distributions on CCDS). Whilst, under its distribution policy, the Board is currently targeting an interim distribution of £5.125 per CCDS for payment in December 2017, the foregoing is not, and should not be construed as, a commitment to do so, and the Board shall be entitled, in its sole and absolute discretion, not to declare any such distribution.

Next steps and Expected Timetable

The Society currently expects to issue further CCDS in accordance with the timetable below, subject to market conditions.

Application will be made to the UK Listing Authority for the further CCDS to be admitted to the standard listing segment of the Official List, and to the London Stock Exchange plc for the further CCDS to be admitted to trading on the London Stock Exchange plc's main market for listed securities ("Admission"). It is currently expected that Admission of, and commencement of dealings in, the CCDS will occur in accordance with the timetable below.

The expected timetable below is indicative only and subject to change.

Launch and book-build in connection with the Offer	6 September 2017
Allocations of further CCDS	7 September 2017
Publication of Prospectus	11 September 2017
Euroclear/Clearstream accounts credited	on or after 14 September 2017 (and no later than 21 September 2017)
Admission and commencement of dealings in the further CCDS	8.00 a.m. on or after 14 September 2017 (and no later than 21 September 2017)
Recalculated Average Principal Amount and Core Capital Contribution Proportion published on Nationwide's website	As soon as reasonably practicable after settlement

Inside Information Notice

This announcement is released by Nationwide Building Society and contains information that qualified or may have qualified as inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"). For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is made by Alex Wall, Head of Capital, Ratings & Investor Relations of Nationwide Building Society.

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For further information, please contact:

Media:

Sara Batchelor

Telephone:      +44 (0) 1793 657770  /  +44 (0) 7785 344137

Email:              [email protected]

Nick Burns-Howell

Telephone:      +44 (0) 1793 658518  /  +44 (0) 7725 680890

Email:              [email protected]

Investor relations:

Alex Wall

Head of Capital, Ratings & Investor Relations

Telephone:      +44 (0) 20 7261 6568

Nationwide Building Society

One Threadneedle Street

London EC2R 8AW

NOTES TO EDITORS

About Nationwide

Nationwide is the UK's largest building society, with total assets of £222 billion as at 4 April 2017 - greater than 140 per cent. of the combined size of the rest of the UK building society sector. It is also the UK's second largest provider of mortgages and the third largest provider of savings. The core business of Nationwide is providing personal financial services, including residential mortgage loans and personal unsecured lending; retail savings; general retail banking services; personal investment products; and insurance. In addition, Nationwide maintains an investment portfolio of debt securities for its own account.

DISCLAIMER - INTENDED ADDRESSEES

Important Notice

This announcement is an advertisement and not a prospectus.  Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the Prospectus expected to be dated and published on or around 11 September 2017 and to be published by Nationwide in connection with the Admission of the further CCDS. Copies of the Prospectus will, once published, be available from the Regulatory News Service (RNS) maintained by the London Stock Exchange.

Forward looking Statements

Certain information contained in this announcement or the Prospectus, including any information as to Nationwide's strategy, plans or future financial or operating performance constitute "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "projects", "expects", "intends", "aims", "plans", "predicts", "may", "will", "seeks" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They may appear in a number of places throughout this announcement or the Prospectus and include statements regarding the intentions, beliefs or current expectations of the directors of the Society (the "Directors") concerning, amongst other things: Nationwide's results of operations, financial condition, prospects, growth, strategies and the industry in which Nationwide operates.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Nationwide's actual results of operations, financial condition, and the development of the financial services industry in which Nationwide operates, may differ materially from those suggested by the forward-looking statements contained in this announcement. In addition, even if Nationwide's results of operations, financial condition, and the development of the financial services industry are consistent with the forward-looking statements contained in this announcement or the Prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

Forward-looking statements and other statements regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing Nationwide. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

The forward-looking statements speak only as of the date of the relevant document. Barclays Bank PLC ("Barclays"), Citigroup Global Markets Limited ("Citigroup"), J.P. Morgan Securities Plc ("J.P. Morgan"), Merrill Lynch International ("BofA Merrill Lynch") and UBS Limited ("UBS" and, together with Barclays, Citigroup, J.P. Morgan and BofA Merrill Lynch, the "Joint Bookrunners") and BNP Paribas and The Royal Bank of Scotland plc (trading as NatWest Markets) (together with the Joint Bookrunners, the "Banks"), which have been appointed as managers in respect of the Offer, the Society and the Directors expressly disclaim any obligation or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, or the Disclosure and Transparency Rules of the Financial Conduct Authority ("FCA"). All subsequent written and oral forward-looking statements attributable to the Nationwide or individuals acting on behalf of the Nationwide are expressly qualified in their entirety by this paragraph.

Offer and Distribution Restrictions

General: Neither this announcement, the publication in which it is contained nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into the United States, the United Kingdom, Canada, Australia, Hong Kong, Singapore, Switzerland, Japan, Jersey or Guernsey or to any persons in any of those jurisdictions or any other jurisdictions, in each case where to do so would constitute a violation of the relevant laws of such jurisdiction. The securities referred to herein have not been and will not be registered under the applicable securities laws of any such jurisdiction and, subject to certain exceptions, may not be offered or sold within, or to any national, resident or citizen of, any such jurisdiction.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any CCDS or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The Offer of CCDS in connection with the Prospectus and the distribution of this announcement and other information in connection with the admission and Offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. No action has been taken or will be taken in any jurisdiction that is intended to permit a public offering or sale of the further CCDS, or possession or distribution of this announcement or the Prospectus or any other offering or publicity material relating to the further CCDS, in any country or jurisdiction where action for that purpose is required.

United States: Neither this announcement, the publication in which it is contained nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"). The securities referred to herein have not been and will not be registered under the applicable securities laws of the United States and, subject to certain exceptions, may not be offered or sold within the United States.

United Kingdom: The Offer is being made in the United Kingdom only to certain institutional and professional investors who are "investment professionals" for the purposes of Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

The contents of this announcement, have been approved for the purposes of section 21(2) (b) of the Financial Services and Markets Act 2000 (as amended) by the Society.

Restriction on marketing and sales to retail investors: the further CCDS are not intended to be sold and should not be sold to "retail clients" in the European Economic Area, as defined in the rules set out in the Product Intervention (Contingent Convertible Instruments and Mutual Society Shares) Instrument 2015 and Chapter 22.2 of the FCA's Conduct of Business Sourcebook, as amended or replaced from time to time, other than in circumstances that do not and will not give rise to a contravention of those rules by any person. Neither the Society nor the Banks will offer or sell further CCDS to retail clients, nor will the Society or any Bank at any time take, or be required to take, any action which would facilitate an offer or sale of any CCDS to any retail client.

Disclaimer

This announcement does not constitute, or form part of, a recommendation concerning the Offer. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. Information in this announcement or any of the documents relating to the Offer cannot be relied upon as a guide to future performance. Potential investors should consult a professional advisor as to the suitability of the Offer for the person concerned.

Any purchase of CCDS in the Offer should be made solely on the basis of the information contained in the final Prospectus published by the Society in connection with Admission. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. The information in this announcement is subject to change.

The Banks, each of which (other than BNP Paribas) is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the PRA and the FCA in the United Kingdom, are acting exclusively for the Society and no one else in connection with the Offer and will not regard any other person (whether a recipient or reader of this document) as their respective clients in relation to the Offer and will not be responsible to anyone other than the Society for providing the protections afforded to their respective clients nor for giving advice in relation to the Offer, the Admission or any other matter referred to in this announcement. BNP Paribas is authorised by the European Central Bank, the Autorité de Contrôle Prudentiel et de Résolution and the PRA and subject to limited regulation by the FCA and PRA.

In connection with the Offer, the Banks and any of their respective affiliates, acting as investors for their own accounts, may subscribe for and/or purchase CCDS, and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own account in CCDS and other securities of the Society or related investments in connection with the Offer or otherwise. Accordingly, references in the Prospectus to the CCDS being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, underwriting or dealing by, any Bank and any of its affiliates acting as an investor for its own account. The Banks do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In addition, certain of the Banks or their affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which such Banks (or their affiliates) may from time to time acquire, hold or dispose of CCDS.  Some of the Banks and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with the Society or its affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. In addition, in the ordinary course of their business activities, the Banks and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Society or its affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

None of the Banks or any of their respective subsidiary undertakings, affiliates or any of their respective directors, officers, employees, advisers, agents or any other person accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy, verification, completeness or fairness of the information or opinions in this announcement (or whether any information has been omitted from this announcement) or any other information relating to the Society, its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith or regarding the legality of any investment in CCDS by any person under the laws applicable to such person or for any other statement made or purported to be made by it, or on its behalf, in connection with the Society, the Offer or the CCDS, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past of the future.

To the fullest extent permissible, each of the Banks accordingly disclaims all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this announcement or any such statement.

Stabilisation and Over-allotment Option 

In connection with the Offer, J.P. Morgan (as "Stabilisation Manager") (or any person acting on behalf of the Stabilisation Manager) may over-allot CCDS or effect other transactions with a view to supporting the market price of the CCDS at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur.  Any stabilisation action may begin on or after the date on which adequate public disclosure of the Issue Price was made and must end no later than the day falling 30 calendar days after the date of allotment of the further CCDS. Any stabilisation action or over-allotment must be conducted by the Stabilisation Manager (or persons acting on behalf of the Stabilisation Manager) in accordance with all applicable laws and rules.

In connection with the Offer, the Society has granted J.P. Morgan as Stabilisation Manager on behalf of the Banks an option (the "Over-allotment Option"), pursuant to which the Stabilisation Manager is entitled to require the Society to make available additional CCDS of up to 15 per cent. of the aggregate number of further CCDS available in the Offer (before any exercise of the Over-Allotment Option) to cover over-allotments, if any, made in connection with the Offer. The Over-allotment Option will be capable of being exercised, in whole or in part, at any time during the period commencing on the date on which adequate public disclosure of the issue price is made and ending on the London business day falling immediately prior to the publication of the Prospectus.

The contents of this announcement are not to be construed as legal financial or tax advice. Each prospective investor should consult his own legal adviser, financial adviser or tax adviser for legal financial or tax advice, respectively.

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