Investor Presentaiton
Risk Factors (cont'd)
Failure to comply with data protection and privacy law could negatively affect the Group's reputation business and financial position.
The Group registers, processes, stores and uses personal data in the course of its business, and it is of high importance that the Group takes
such actions in accordance with applicable personal data legislation and requirements. The Group's operations are subject to a number of laws
relating to data privacy, including Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of
natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC
(GDPR) and Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and
the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (the latter as
implemented in different jurisdictions in which it operates) as well as relevant data protection and privacy laws. The GDPR includes higher
sanctions for breaches than previous data protection legislation and there is a risk that the fines could amount to the higher of EUR 20 million or
four per cent. of the global turnover. The requirements of these laws may affect the Group's ability to collect and use personal data in a way that
is of commercial use to the Group. Breach of data privacy legislation could result in the Group being subject to claims from its customers that it
has infringed their privacy rights, and it could face administrative proceedings (including criminal proceedings) initiated against it by the data
protection regulators. In addition, any inquiries made, or proceedings initiated by, the regulator could lead to negative publicity in addition to
potential liability for the Group, which could materially adversely affect its reputation and business. Hence, if the Group is in breach of personal
data legislation this could have a material adverse effect on the Group's business, earnings or financial position.
There is a risk that future changes of data protection and privacy laws may lead to the Group not being able to continue its operations in the
same course of action as currently. There is also a risk that changes in these regulations may increase costs to ensure compliance with such
laws, having a material adverse effect on the Group's operations, earnings and financial position.
Legal disputes and litigations could have a negative effect on the Group's business, financial position and results of operation.
The Group is not currently involved in any material legal disputes or litigations. There is however a risk that the Group could become involved in
legal disputes or subject to other litigation in the future. Disputes of different kinds can be time consuming, disrupt normal operations, involve
large amounts and result in considerable costs and reputational risks, which would have a negative effect on the Group's business, financial
position and results of operation.
c)
a bail-in is necessary in the public interest.
Bail-in would apply to any liabilities of the Group not backed by assets or collateral. It would not apply to deposits protected by a deposit guarantee
scheme, short-term inter-bank lending or claims of clearing houses and payment and settlement systems with a remaining maturity of seven days,
client assets, or liabilities such as salaries, pensions, or taxes.
After shares and other similar instruments, bail-in will first, if necessary, impose losses evenly on holders of subordinated debt and then evenly on
senior debt-holders. Deposits from SMEs and natural persons, including those in excess of EUR 100,000, will be preferred to senior creditors.
The tool applies as of 1 January 2015 to all outstanding and newly issued debt. Accordingly, in the event that Ferratum Bank meets the trigger
conditions for entry into resolution, any portion of the Bonds, including both principal and accrued interest, that will not be backed by collateral could
become subject to a write down or otherwise converted to equity as determined by the Resolution Authority. The write-down of liabilities and/or their
conversion to equity will be beyond the Issuer's control. The write-down or conversion would follow the ordinary allocation of losses and ranking in
insolvency. Equity has to absorb losses in full before any debt claim is subject to write-down or conversion. The determination by the Resolution
Authority shall not constitute an event of default and bondholders will not have any further claims in respect of any amount so written off, converted
to equity or otherwise applied to absorb losses. As a result, bondholders may lose all or part of their investment.
The term 'Resolution Authority, as utilised in this section, refers to the public administrative authority appointed within the jurisdiction of Malta and
empowered to apply the resolution tools and exercise the resolution powers described in the BRRD. The resolution authority in Malta is the Malta
Financial Services Authority.
Credit risks.
Investors in the Bonds carry a credit risk relating to the Group. The investors' ability to receive payment under the Terms and Conditions is dependent
on the Issuer's ability to meet its payment obligations, which in turn is largely dependent upon the performance of the Group's operations and its
financial position. The Group's financial position is affected by several factors of which some will be mentioned on the proceeding pages. An increased
credit risk may cause the market to charge the Bonds a higher risk premium, which would affect the Bonds' value negatively. Another aspect of the
credit risk is that a deteriorating financial position of the Group may reduce the Group's possibility to receive debt financing at the time of the maturity
of the Bonds.
RISKS RELATING TO THE BONDS
The EU Bank Recovery and Resolution Directive could have a negative effect on the bondholders' investment.
The EU Bank Recovery and Resolution Directive (the "BRRD" or the "Directive"), which sets common rules across the EU for dealing with failing banks
and large investment firms, came into force on 1 January 2015. The BRRD lays out a comprehensive set of measures that ensure that both banks and
authorities make adequate preparation for crises, by empowering national authorities to intervene in troubled institutions at a sufficiently early stage
to address developing problems, and to take rapid and effective action when bank failure cannot be avoided.
The Directive has also established a bail-in system. In Malta, bail-in was immediately applicable to junior debt holders as from 1 January 2015 and
applicable to senior debt holders from 1 January 2016. The purpose of the bail-in system is to stabilise a failing bank so that its essential services can
continue, without the need for bail-out by public funds. The tool enables authorities to recapitalise a failing bank through the write-down of liabilities
and/or their conversion to equity so that the bank can continue as a going concern, giving authorities time to reorganise the bank or wind down parts
of its business in an orderly manner. In the process, directors and senior management may be removed or replaced if those persons are found unfit
to perform their duties.
The application of the bail-in system requires the prior evaluation as to whether certain conditions are met. In particular, the following pre-requisites
would need to be satisfied:
a)
a determination by the competent authority or Resolution Authority that a bank is failing or is likely to fail;
b)
no reasonable prospect that any alternative private sector measures or supervisory action would prevent the failure of the bank within a
reasonable timeframe; and
Refinancing risk.
The Group may eventually be required to refinance certain or all of its outstanding debt, including the Bonds. The Group's ability to successfully
refinance its debt is dependent on the conditions of the capital markets and its financial condition at such time. The Group's access to financing
sources may not be available on favourable terms, or at all.
The Group's inability to refinance its debt obligations on favourable terms, or at all, could have a material adverse effect on the Group's business,
financial condition and results of operations and on the bondholders' recovery under the Bonds.
Liquidity risk.
The Issuer intends to list the Bonds on the corporate bond list of Nasdaq Stockholm and initially in the Open Market and later on the Regulated
Market (Prime Standard) of the Frankfurt Stock Exchange (provided that the volume requirement is met). Even if the Bonds are admitted to trading on
the aforementioned markets, active trading in the Bonds does not always occur and a liquid market for trading in the Bonds might not occur even if
the Bonds are listed. This may result in the bondholders not being able to sell their Bonds when desired or at a price level which allows for a profit
comparable to similar investments with an active and functioning secondary market. Lack of liquidity in the market will have a negative impact on the
market value of the Bonds. Furthermore, the nominal value of the Bonds may not be indicative compared to the market price of the Bonds if the
Bonds are admitted to trading. It should also be noted that during a given time period it may be difficult or impossible to sell the Bonds (at all or at
reasonable terms) due to, for example, severe price fluctuations, close down of the relevant market or trade restrictions imposed on the market.
ferratum
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