PRELIOS: BOARD ENFORCES MANDATE ON CONVERTIBLE LOAN

Price sensitive

- THE DATE OF ISSUE AND THE EXACT AMOUNT OF THE CONVERTIBLE LOAN UP TO 269 MLN/€ WILL BE DETERMINED AFTER THE CAPITAL INCREASE

Milan, 10 June 2013 – Following to the decisions adopted and disclosed on 30 May 2013, theBoard of Directors of Prelios S.p.A., held on today’s date in the presence of the Notary Public Prof.Carlo Marchetti, has formally enforced its mandate assigned to it by the Shareholders’ Meeting on8 May 2013, to implement the issue, up to the nominal amount of euro 269,000,000.00, ofmandatory convertible debentures (“Convertible Debentures” or “Debentures”) into ordinary sharesand/or into class B shares (the “Convertible Loan”), excluding option right, with consequent capitalincrease for the exclusive service of the conversion.

Consequently, the Board of Directors resolved:

  • to approve the relevant mandatory convertible debenture Regulation (the “Convertible Debenture Regulation”);
  • to approve the divisible capital increase against payment for max. euro 297,644,375.01. Suchincrease may be implemented within 7 years - subject to extension by further 3 years - from issueof the Convertible Loan - for the exclusive service of the (partial or full) conversion of Debentures,through the issue of max. n. 499,990,551 Prelios ordinary shares as for tranche A of theConvertible Loan (including the case in which also tranche B is converted into ordinary shares)and of max. n. 144,678,117 class B shares exclusively as for tranche B of the Convertible Loan;
  • to consequently amend art. 5 of the Company By-Laws;
  • to assign all necessary and appropriate powers to enforce the resolution and, in particular, tovest the CEO with the powers relating to the issue of the Convertible Loan after accuratedetermination of the actual amount thereof upon the outcome of the capital increase with optionrights for about euro 115 million, which has been approved by the Shareholders’ Meeting of 8 May2013 as already disclosed to the market (the “Capital Increase with Option Rights”).

Main characteristics of the Convertible Loan and of the capital increase for the service of conversion

The Convertible Loan shall consist of bonds with a unit face value of euro 1,000, that shall beissued by Prelios at the date to be specified after the execution of the Capital Increase with OptionRights. Following to the Capital Increase with Option Rights the exact amount will be determined(up to the nominal amount of euro 269,000,000.00) as well as the total number of ConvertibleDebentures, both for Tranche A and Tranche B (up to max. euro 269,000,000).

In particular, 71.1% of all Convertible Debentures will be allocated to Tranche A and 28.9% toTranche B, reserved for subscription to Lenders(1), for Tranche A, and to Pirelli & C. S.p.A., forTranche B, respectively.

Unless otherwise provided for by the Convertible Loan Regulation, the Debentures – that shall beissued at par – will be automatically converted at maturity date (or earlier in the cases provided forby the Convertible Loan Regulation). In particular, Tranche A Debentures will be converted intoPrelios newly issued ordinary shares and Tranche B Debentures will be converted into Preliosclass B newly issued shares (the “Converted Shares”). The Convertible Debentures will bepayable to bearer and will not be fractionable; upon request and against reimbursement ofexpenses, they may be converted into registered debentures and viceversa and shall accruedividend from issuance date.

The term of the Convertible Loan will be from issue date to 31 December 2019; however, theConvertible Debenture holders (unanimously) and Prelios may agree to postpone the maturity dateto 31 December 2022, upon occurrence of given prerequisites that are defined in details in theConvertible Loan Regulation.

At maturity date (as it may be extended), the existing Convertible Debentures – net of anyDebentures earlier converted into Underlying Shares or reimbursed in cash pursuant to theConvertible Loan Regulation – shall be reimbursed through automatic conversion into UnderlyingShares, without prejudice to the provisions of the Aggregate Debt Rescheduling Agreement(subscribed with all Lenders on 7 May 2013 and already disclosed to the market) about thepossibility to convert euro 50 million into a new loan on terms and conditions similar to the supersenior loan, as envisaged under said Agreement.

It is envisaged that the Convertible Debentures bear a capitalized gross annual interest, that iscalculated on the face value of the same Convertible Debentures – existing from time to time -, at1%, to be paid out by deferred payment.

In the event that, upon occurrence of the prerequisites for the conversion (as regulated in detailsby the Convertible Loan Regulation), Prelios ordinary shares are traded on a regulated market, theconversion price shall be equal to (i) euro 0.5953(2) and (ii) the weighted average of stock officialprices of Prelios ordinary shares in the month preceding the conversion date, whichever is higher(the “Conversion Price”). An alternative mechanism to determine the conversion price is envisagedin the event that, at such date, Prelios ordinary shares have ceased to be traded on a regulatedmarket.

The conversion ratio, which indicates the number of Underlying Shares to be attributed to eachConvertible Debenture at conversion date, is determined on the basis of the formula provided forby the Convertible Loan Regulation. Such formula, that is applicable to all conversion cases,envisages – briefly – the allocation of a number of Underlying Shares equal to the quotientbetween (i) face vale of the subscribed Convertible Debentures and the relevant interest, and (ii)Conversion Price. It is hereby specified that the Convertible Loan Regulation also envisages amechanism of adjustment of the Conversion Price in case of extraordinary transactions.

As already said, for the exclusive service of the Convertible Loan, a divisible capital increase hasbeen resolved upon all at once or in more tranches and at the latest by 31 March 2023, for max.euro 297,644,375.01, to be implemented through the issue of max. n. 499,990,551 ordinary sharesand max. n. 144,678,117 class B shares without face value, with regular dividend, having the samecharacteristics as the outstanding shares at issue date.

With reference to the Conversion Price, the appointed independent auditor, Reconta Ernst &Young S.p.A., issued its opinion on the fairness of the issue price for the capital increase excludingthe option right for the service of the Convertible Loan, in the report drafted by the same pursuantto law.