SNS Reaal Offers Bondholders $66 Million Ahead of Court Ruling

SNS Reaal NV offered to pay 50 million euros ($66 million) to some holders of subordinated debt seized during the Dutch bank’s nationalization, while others seeking compensation will have to await a court ruling.

SNS didn’t properly inform investors of the risks associated with buying the participation certificates, a type of subordinated debt, the Utrecht-based bank said in a written statement today. The compensation for buying the bonds sold in June 2003 is equal to the nominal value plus interest investors would have earned on 10-year government bonds, it said.

Dutch Finance Minister Jeroen Dijsselbloem wiped out holdings of SNS Reaal’s stock and subordinated debt when he took control of the firm in February, saving taxpayers about 1 billion euros. The Amsterdam Appeals Court’s Enterprise Chamber may decide today whether investors are entitled to compensation. The holdings would have been worthless had the firm been liquidated instead, Dijsselbloem said in March.

The SNS rescue has cost the Netherlands 3.7 billion euros in write-offs and capital injections, and it is also providing 6.1 billion euros in loans and guarantees.

SNS has already made provisions in its first-quarter earnings for the amount of the compensation announced today, Roland Kroes, a spokesman for the bank, said by telephone. The settlement is separate from the procedure before the Enterprise Chamber, the bank said. Should the court define a level of compensation exceeding the offer, the state will make up the difference, Dijsselbloem said in a letter to parliament today.

The Enterprise Chamber has the option to appoint investigators to study the value of the expropriated securities, rather than rejecting the appeal by investors or setting an amount for compensation.

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