KÄHRS HOLDING AB (PUBL)

Transcription

1 KÄHRS HOLDING AB (PUBL) PROSPECTUS REGARDING LISTING OF MAXIMUM SEK 750,000,000 SENIOR UNSECURED CALLABLE FLOATING RATE BONDS 2012/ September 2013

2 Important information This prospectus (the Prospectus ) has been prepared by Kährs Holding AB (publ) (the Company ), registration number , in relation to the application for listing of the Company s maximum SEK 750,000,000 senior unsecured callable floating rate bonds 2012/2017 ISIN SE (the Bonds ), issued on 20 December 2012 (the Issue Date ) in accordance with the terms and conditions for the Bonds (the Terms and Conditions ) (the Bond Issue ), on the Corporate Bond List at NASDAQ OMX Stockholm AB ( NASDAQ OMX Stockholm ). References to the Company, Kährs Holding or the Group refer in this Prospectus to Kährs Holding AB (publ) and its subsidiaries, unless otherwise indicated by the context. This Prospectus has been prepared in accordance with the rules and regulations in the Swedish Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument) and Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council, each as amended. This Prospectus has been approved by and registered with the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) in accordance with the provisions in Chapter 2, Sections 25 and 26, of the Swedish Financial Instruments Trading Act. It should be noted that such approval and such registration does not constitute any guarantee from the Swedish Financial Supervisory Authority that the information in this Prospectus is accurate or complete. This Prospectus is not an offer for sale or a solicitation of an offer to purchase the Bonds in any jurisdiction. It has been prepared solely for the purpose of listing the Bonds on NASDAQ OMX Stockholm. This Prospectus may not be distributed in any country where such distribution or disposal requires additional prospectus, registration or additional measures or is contrary to the rules and regulations in such country. Persons into whose possession this Prospectus comes or persons who acquire the Bonds are therefore required to inform themselves about, and to observe, such restrictions. The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), or any U.S. state securities laws and may be subject to U.S. tax law requirements. Subject to certain exemptions, the Bonds may not be offered, sold or delivered within the United States of America or to, or for the account or benefit of, U.S. persons (as defined in Rule 902 of Regulation S under the Securities Act). The Company has not undertaken to register the Bonds under the Securities Act or any U.S. state securities laws or to affect any exchange offer for the Bonds in the future. Furthermore, the Company has not registered the Bonds under any other country s securities laws. It is the investor s obligation to ensure that the offers and sales of Bonds comply with all applicable securities laws. The Prospectus will be available at the Swedish Financial Supervisory Authority s web page ( and the Company s web page ( and paper copies may be obtained from the Company. Unless otherwise explicitly stated, no information contained in this Prospectus has been audited or reviewed by the Company s auditors. Certain financial information in this Prospectus has been rounded off and, as a result, the numerical figures shown as totals in this Prospectus may vary slightly from the exact arithmetic aggregation of the figures that precede them. Unless otherwise specified or unless the context otherwise requires, EUR refers to Euros, NOK refers to Norwegian kroner, RON refers to New Romanian leu, RUB refers to Russian roubles, SEK refers to Swedish kronor and USD refers to United States dollars. This Prospectus may contain forward-looking statements and assumptions regarding future market conditions, operations and results. Such forward-looking statements and information are based on the beliefs of the Company s management or are assumptions based on information available to the Group. The words considers, intends, deems, expects, anticipates, plans and similar expressions indicate some of these forward-looking statements. Other such statements may be identified from the context. Any forward-looking statements in this Prospectus involve known and unknown risks, uncertainties and other factors which may cause the actual results, performances or achievements of the Group to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Further, such forward-looking statements are based on numerous assumptions regarding the Group s present and future business strategies and the environment in which the Group will operate in the future. Although the Company believes that the forecasts of, or indications of, future results, performances and achievements are based on reasonable assumptions and expectations, they involve uncertainties and are subject to certain risks, the occurrence of which could cause actual results to differ materially from those predicted in the forward-looking statements and from past results, performances or achievements. Further, actual events and financial outcomes may differ significantly from what is described in such statements as a result of the materialisation of risks and other factors affecting the Group s operations. Such factors of a significant nature are mentioned in section Risk Factors below. This Prospectus shall be read together with all documents that are incorporated by reference (see section Documents incorporated by reference below) and possible supplements to this Prospectus. The Bonds may not be a suitable investment for all investors and each potential investor in the Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should (i) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and the information contained or incorporated by reference in this Prospectus or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Bonds and the impact other Bonds will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Bonds; (iv) understand thoroughly the Terms and Conditions; and (v) be able to evaluate (either alone or with the help of a financial advisor) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. This Prospectus is governed by Swedish law. Disputes concerning, or related to, the contents of this Prospectus shall be subject to the exclusive jurisdiction of the courts of Sweden. The District Court of Stockholm (Sw. Stockholms tingsrätt) shall be the court of first instance.

3 3 Table of Contents Important information... 2 Risk factors... 4 Responsible for the information in the Prospectus The Bonds in brief The Company and its operations Board of directors, senior management and auditors Financial overview Documents incorporated by reference Documents available for inspection Terms and Conditions for the Bonds Addresses... 75

4 4 Risk factors Investing in the Bonds involves inherent risks. The financial performance of the Group and the risks associated with its business are important when making a decision on whether to invest in the Bonds. A number of risk factors and uncertainties may adversely affect the Group. If any of these risks or uncertainties actually occurs, the business, operating results and financial position of the Group could be materially and adversely affected, which ultimately could affect the Company s ability to make payments of interest and repayments of principal under the Terms and Conditions. In this section, a number of risk factors are illustrated, both general risks pertaining to the Group s business operations and material risks relating to the Bonds as financial instruments. The risks presented in this Prospectus are not exhaustive, and other risks not discussed herein, not currently known or not currently considered to be material may also affect the Company s future operations, performance and financial position, and consequently the Company s ability to meet its obligations under the Terms and Conditions for the Bonds. Further, the risk factors are not ranked in order of importance. Potential investors should consider carefully the information contained in this section and make an independent evaluation before making an investment decision. Potential investors should carefully consider the risk factors below and other information in this Prospectus before deciding on making an investment in the Bonds. Risks related to the Company Merger and integration The Group may have significant integration costs as well as restructuring costs with regard to the merger between Aktiebolaget Gustaf Kähr and Karelia-Upofloor Oy. The merger was completed on 3 December 2012 and if the Group does not manage to successfully integrate Aktiebolaget Gustaf Kähr s and Karelia-Upofloor Oy s different operations, the Group and its business may not perform as expected or expected synergies may not be obtained. This may adversely affect the Group s operations, financial position and results. Fluctuations in demand The Group is reliant on demand for its products. Changes in demand arising due to economic downturn or customers sourcing alternative suppliers, amongst other factors, could adversely impact the Group s financial performance. Customers The Group s business activities, which consist of production and sale of wood floors and resilient flooring products, are conducted in several different countries with multiple customer sectors, including builders and contractors, builder merchants and major retail chains in various segments. A weak development in any of these customer sectors, the flooring industry in general or a material reduction in orders from major customers could lead to a reduced demand for flooring products in general and/or the Group s products in particular, which could have an adverse effect on the Group s net sales, financial position and earnings. If a number of the Group s customers experience difficulties in financing their business, the Group may not be able to fully collect its accounts receivables. This may have an adverse effect on the Group s net sales, financial position and earnings.

5 5 Suppliers The Group s manufacturing process depends on the availability and timely supply of raw materials and components from external suppliers. Material such as wood is particularly sensitive for the Group. Delays in supplies may have adverse consequences for production resulting in an adverse effect on the Group s net sales, financial position and earnings. Manufacturing The Group manufactures and assembles its products in Finland, Romania, Russia and Sweden. A lengthy disruption of manufacturing and production in any of the Group s different facilities may have an adverse effect on the Group s net sales and earnings. Raw material prices The Group is continuously working on cost effectiveness and on increasing purchases from lowcost countries. If the price for raw materials increases, the Group s ability to recover increased costs through higher pricing may be limited by the competitive environment and demand. Volatile pricing of raw materials can have an adverse effect on the Group s turnover, financial position and earnings. Warranty expenses The Group s operations comprise all the steps in the value chain, including research and development, manufacturing, marketing and sales. Operational failures in any operations or part of the value chain could result in quality problems. Unforeseen product quality problems in the development and manufacturing of new and existing products could harm the Group s brands and result in loss of market share and higher warranty expenses. Product liability The Group companies are exposed to product liability claims in the event that the Group s products are claimed to have caused damage to persons or property. The Group has taken out insurance for such claims. However, any such claims could have an adverse effect on the Group s net sales, financial position and result. Employees and labour conflicts Historically, the Group has not been subject to labour conflicts to any great degree. However, if such conflicts occur, for example in connection with the closing-down of plants or if the Group chooses to move production to low-cost countries, labour conflicts may have an adverse effect on the Group s net sales, financial position and earnings. Russia and Romania The risks associated with the Group s activities in Russia and Romania are common to all investments in growth countries and are not characteristic of any specific Group company. An investment in the Bonds will be subject to general risks associated with investing in securities associated with companies with operations in Russia and Romania. The Group s operations could be adversely affected by, e.g., negative changes in the political and business environment, deficiencies in the legislation on and procedures for corporate governance and corruption and nonacceptable business practices in Russia and Romania, respectively. In the event that the Group s operations are affected by the occurrence of such factors, it could have an adverse impact on the Group s net sales, financial position and earnings.

6 6 Global economic conditions Historically, the market for the Group s products has been characterised by a relatively stable demand over a business cycle. However, a lengthy economic downturn, a sustained loss of consumer confidence in the markets in which the Group operates, or problems for the Group s customers in financing their businesses, could trigger a decrease in demand for the Group s products and a decline in sales for the industry as well as the Group companies. This could have an adverse impact on the Group s net sales, financial position and earnings. Capital and credit market conditions In recent years, the capital and credit markets have been experiencing extreme volatility and disruption. The Group requires liquidity to pay operating expenses and interest on debt and to repay maturing liabilities. Without sufficient liquidity, the Group will be forced to curtail its operations. Volatility and disruption on capital and credit markets may also cause the Group companies to be in breach of financial covenants in credit and/or loan agreements. In the event that current resources do not satisfy the Group s financial requirements, it may have to seek additional financing, or be forced to renegotiate financial instruments on less than favourable terms. Disruptions in the financial markets, as the ones described above, could adversely affect the Group s net sales, financial position and cash flow. Difficult conditions in the global capital markets and the economy in general The Group s net sales are materially affected by conditions in the global capital markets and the economy in general in Europe and elsewhere in the world. Recently, concerns over energy costs, geopolitical issues and the availability and cost of credit have contributed to increased volatility and negative future expectations for the economy and the global market. Factors such as consumer spending, business investment, government spending, the volatility and strength of the capital markets and inflation all affect the business and economic environment and, ultimately, the amount and profitability of the Group s business. In an economic downturn characterised by higher unemployment, lower incomes, lower corporate earnings, lower business investment and lower consumer spending, the Group s business may be adversely affected. Competition and price pressure The markets for the Group s products are highly competitive. The market is particularly exposed to price pressure since it is characterised by a consolidation among distributors and retail chains. Companies from Asia and other low-cost regions may seek to strengthen their position in the market and could, by improving their current technology and product know-how, become significant competitors and take market shares. The Group may be forced to make costly restructuring of its operations in order to keep up with increasing competition and maintain profitability, for example, by closing down or transferring production units. If industries in leading manufacturing countries believe that they are under threat from imports from low-cost or even high-cost countries, they may commence legal actions or induce their governments to introduce trade restrictions. Such measures could threaten the Group s import to such countries, and could have an adverse effect on the Group s net sales, financial position and earnings.

7 7 Environmental risks Although the Group believes that its operations are in substantial compliance with applicable environmental, health and safety laws and regulations, violations of such laws and regulations have occurred and may also occur in the future. The Group s operations are also linked to risks connected to the ownership and maintenance of industrial properties, such as the risk of undertaking investigations and the remediation of past or present contamination. Other developments, such as increased requirements of environmental, health and safety laws and regulations, increasingly strict enforcement of them by government authorities, and claims for damage to property and injury to persons resulting from environmental, health or safety impacts of the Group s operations or past contamination, could result in an order to pay fines or conditional fines or measures under civil or criminal laws. Such developments may also prevent or restrict the Group s operations. All such environmental risks may, if realised, have an adverse effect on the Group s net sales, financial position and earnings. Intellectual property rights The Group sells products under several well-known trademarks such as Karelia, Kährs, Lifeline, SAIMA and Upofloor. It is of great commercial significance for the Group that the trademarks are protected against unauthorised use by competitors and that the goodwill connected to the brands may be maintained. In order to meet the market s needs, the Group must continuously develop new technical solutions and new designs. It is of great importance that such new technologies and designs are protected against unauthorised use by competitors. Any failure to protect against unauthorised use by competitors may have an adverse effect on the Group s net sales, financial position and earnings. If the Group s actions or products are considered to infringe a third party s valid intellectual property rights or if it is considered to use a third party s trade secrets without authorisation, it cannot be ruled out that resulting claims will have an adverse effect on the Group s net sales, financial position and earnings. Disputes and litigation The Group companies are involved in disputes in the ordinary course of business. Such disputes may prove costly and time-consuming and may disrupt normal operations. It cannot be ruled out that a disadvantageous outcome of a dispute may prove to have an adverse effect on the Group s net sales, financial position and earnings. Kährs International Inc. is currently involved in a dispute with the U.S. Customs regarding the classification of certain products and the obligation to pay import duties on such products retroactively. The classification case has been processed by the U.S. Court of Appeals for the Federal Circuit, based in Washington D.C., and the court s decision of 3 April 2013 ruled in favour of the U.S. Customs. As a result, the U.S. Customs may be entitled to claim import duties of eight per cent retroactively for the years , entailing additional costs of approximately USD 20 million (or more) plus penalties. In order to recover any amount from Kährs International Inc. in a Court action, the U.S. Customs would need to prove that Kährs International Inc. failed to exercise reasonable care when importing the flooring products during that time period. In the event of a successful claim from the U.S. Customs, or if a favourable settlement with the U.S. Customs

8 8 cannot be reached, Kährs international Inc. could be forced to file for bankruptcy, which in turn would lead to a need for a reorganisation of the Group s U.S. business. A disadvantageous outcome may also have an adverse effect on the Group s financial position. Insurance coverage The Group maintains insurance coverage for a variety of exposures and risks, such as property damage, business interruption and product liability claims. The Group believes that the insurance it has taken out for foreseen exposures is sufficient. However, there are no guarantees that the Group will be able to maintain the insurance coverage in the future on acceptable terms, that future claims will not exceed or fall outside the Group s insurance coverage through external insurance companies or that the Group s provisions for uninsured losses will be sufficient to cover the final costs. Such costs may prove to have an adverse effect on the Group s net sales, financial position and earnings. General tax risks The Group operates its business through subsidiaries in a number of jurisdictions. The business, including intra-group transactions, is conducted in accordance with the Group s interpretation of applicable laws, tax treaties, regulations and requirements of the tax authorities in the relevant countries. The Group has obtained advice from independent tax advisors in this respect. However, it cannot be ruled out that the Group s interpretation of applicable laws, tax treaties, regulations, or administrative practice is incorrect, or that such rules are changed, possibly with retroactive effect. Legislative changes or decisions by tax authorities may impair the present or previous tax position of the Group companies. Tax management risks The Group s management is continuously seeking ways in which to manage its tax position efficiently. The Group works closely with external tax experts in these efforts and believes that it complies with relevant tax legislation and regulations. However, if measures are taken and are successfully challenged by any tax authority, the Group companies may incur additional expenses with respect to tax, interest and penalties, which may have an adverse effect on the Group s financial position and earnings. Foreign exchange risks The Group operates through subsidiaries around the world and is thereby subject to currency fluctuation risks in different currencies. These fluctuations affect the Group s earnings in terms of translation of income statements in foreign subsidiaries, namely translation exposure, as well as the sale of products on the export market, namely transaction exposure. The Group is exposed to currency fluctuation risks related primarily to earnings in EUR, NOK, RON, RUB, SEK and USD. In addition, changes in exchange rates can affect the prices of raw materials purchased in foreign currencies. If the Group does not manage to adequately reduce the effects of exchange rate fluctuations, this may have an adverse effect on the Group s net sales, financial position and earnings. Interest rate risks The Group finances its operations through borrowing and may in compliance with the Terms and Conditions incur further financial indebtedness. This means that part of the Group s cash flow will

9 9 be used to pay interest on its debts, which reduces the funds available for business activities and future business opportunities. A future increase in interest rates could increase the interest payments, which may have an adverse effect on the Group s cash flow, financial position and earnings. Credit risks The Group is exposed to credit risks. Credit risk arises through cash and cash equivalents, derivate instruments and balances at banks and financial institutions, as well as credit exposure to customers, including outstanding receivables and contractual transactions. The credit risk thus refers to the risk that the Group will not receive payment as agreed and/or will make a loss due to counterparty s inability to meet its commitment towards the Group. Since it cannot be excluded that any counterparty of the Group has financial difficulties or otherwise is unable to meet its obligations, this could result in losses for the Group. If the Group fails to manage its credit risks adequately, this may have an adverse effect on the Group s net sales, financial position and earnings. Risks relating to the refinancing of the Bonds The Company will be required to refinance the Bonds when they become payable in accordance with the Terms and Conditions, for example by issuing new bonds or raising a bank loan. The Company s possibility to successfully refinance the Bonds will depend on the conditions on the capital markets and the Company s financial position by the time of the refinancing. The availability of funds may be limited by the time of the refinancing even if the market conditions are favourable. It cannot be guaranteed that new capital may be raised when required or raised on terms acceptable to the Company. If the Company is unable to obtain sufficient financing when the Bonds lapse or if the Bonds would become payable earlier, the Company s assets may not suffice for the repayment of the Bonds. Risks relating to the Bonds Credit risks An investment in the Bonds carries a credit risk relating to the Group. The investor s ability to receive payment under the Terms and Conditions is therefore dependent on the Group 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, a number of which have been discussed above. An increased credit risk may cause the market to charge the Bonds a higher risk premium, which would have an adverse effect on the value of the Bonds. Another aspect of the credit risk is that any deterioration in the financial position of the Group may reduce the possibility for the Group to refinance the Bonds. Liquidity risks The Company intends to apply for listing of the Bonds on NASDAQ OMX Stockholm. However, the Company cannot guarantee that the Bonds will be admitted to trading. Further, even if securities are admitted to trading on a regulated market, there is not always active trading in the securities, so there are no guarantees that there will be a liquid market for trading in the Bonds or, if the market for trading in the Bonds is liquid at a given point of time, that such liquidity will be permanent even if the Bonds are listed. This may result in the bondholders being unable to sell

10 10 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 may have an adverse effect 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 on NASDAQ OMX Stockholm. It should also be noted that during a given time period it may be difficult or impossible to sell the Bonds (at all or on reasonable terms) due to, for example, severe price fluctuations, the relevant market being shut down or trade restrictions imposed on the market. The market price of the Bonds may be volatile The market price of the Bonds could be subject to significant fluctuations in response to actual or anticipated variations in the Group s operating results and those of its competitors, adverse business developments, changes to the regulatory environment in which the Group operates, changes in financial estimates by securities analysts and the actual or expected sale of a large number of Bonds, as well as other factors. In addition, in recent years the global financial markets have experienced significant price and volume fluctuations, which, if repeated in the future, could adversely affect the market price of the Bonds without regard to the Group s operating results, financial condition or prospects. Defaults and insolvency of subsidiaries In the event of insolvency, liquidation or a similar event relating to any of the Company s subsidiaries, all creditors of such subsidiary would be entitled to payment in full out of the assets of such subsidiary before the Company, as a shareholder, would be entitled to any payments. Defaults by, or the insolvency of, certain subsidiaries of the Company could result in the obligation of the Company to make payments under parent company financial or performance guarantees in respect of such subsidiaries obligations or the occurrence of cross defaults on certain borrowings of the Company or other Group companies. There can be no assurance that the Company and its assets would be protected from any actions by the creditors of any subsidiary of the Company, whether under bankruptcy law, by contract or otherwise. Dependence on other companies in the Group The Company is a parent company and is dependent upon receipt of sufficient income related to the operation of and the ownership in the other entities within the Group to enable it to make payments under the Bonds. The Group s operating companies are legally separate and distinct from the Company and have no obligation to pay amounts due with respect to the Company s obligations and commitments, including the Bonds, or to make funds available for such payments. The ability of the Group s operating companies to make such payments to the Company is subject to, among other things, the availability of funds. Preferential rights The Bonds are secured through a pledge over all the Company s present and future money claims under the intercompany loan agreements with Aktiebolaget Gustaf Kähr and Karelia-Upofloor Oy, entered into on or about the Issue Date, pursuant to which the proceeds from the Bond Issue have been on lent. There can be no guarantee that the pledged assets will be sufficient for the bondholders should the pledge be realised. Other than the security created under the aforementioned pledge, the Bonds represent an unsecured obligation of the Company. This means

11 11 that in the event of bankruptcy, reorganisation or winding-up of the Company, the holders of the Bonds receive payment after any priority creditors have been paid in full. Each investor should be aware that there is a risk that an investor in the Bonds may lose all or part of their investment if the Company is declared bankrupt, carries out a reorganisation or is woundup. Risks related to early redemption and put option Under the Terms and Conditions, the Company has reserved the possibility to redeem all outstanding Bonds before the final redemption date. If the Bonds are redeemed before the final redemption date, the bondholders have the right to receive an early redemption amount which exceeds the nominal amount. However, there is a risk that the market value of the Bonds is higher than the early redemption amount and that it may not be possible for bondholders to reinvest such proceeds at an effective interest rate as high as the interest rate on the Bonds and may only be able to do so at a significantly lower rate. According to the Terms and Conditions, the Bonds are subject to prepayment at the option of each bondholder (put option) upon a Change of Control Event (as defined below and as stipulated in the Terms and Conditions). There is however a risk that the Company will not have sufficient funds at the time of such prepayment to make the required prepayment of Bonds. Exits and change of control Private equity funds, such as Triton Fund III, make investments with the objective of exiting the investment within a certain time frame. As part of their investment strategy, private equity funds take an active role in managing their portfolio companies. Pursuant to the Terms and Conditions, the current shareholder of the Company (being indirectly owned by inter alia Triton Fund III) may make an exit by way of a private sale or an initial public offering of the shares in the Company without the bondholders being entitled to have their Bonds repurchased, provided that no event or series of events whereby one or more persons, not being the present shareholders, acting together, acquire control over the Company and where control means (i) acquiring or controlling, directly or indirectly, more than 50 per cent of the voting shares of the Company, or (ii) the right to, directly or indirectly, appoint or remove the whole or a majority of the directors of the board of directors of the Company ( Change of Control Event ). It cannot be excluded that the identity of the shareholders may impact the attitude towards the Company and success of the Group, which means that a Change of Control Event may adversely impact the Company s and/or the Group s operations, financial position and results. The possible impacts on the Group of a Change of Control Event without the bondholders being entitled to have their Bonds repurchased in connection with such exit constitute a risk for the bondholders. Restrictions on the transferability of the Bonds The Bonds have not been and will not be registered under the Securities Act or any U.S. state securities laws. Subject to certain exemptions, a holder of the Bonds may not offer or sell the Bonds in the United States. The Company has not undertaken to register the Bonds under the Securities Act or any U.S. state securities laws or to affect any exchange offer for the Bonds in the future. Furthermore, the Company has not registered the Bonds under any other country s securities laws. Each potential investor should read the discussion in the section Important information above for further information about the transfer restrictions that apply to the Bonds.

12 12 It is the bondholder's obligation to ensure that the offers and sales of Bonds comply with all applicable securities laws. Since bondholders may be subject to purchase or transfer restrictions with regard to the Bonds, as applicable from time to time under local laws to which a bondholder may be subject, it cannot be excluded that a certain bondholder is prevented from executing a desired disposal of the Bonds. Applicable transfer restrictions may thus restrain the legal capacity of certain bondholders in a manner which involves an inherent risk to such bondholders. Risks relating to the clearing and settlement in Euroclear s book-entry system The Bonds are affiliated to Euroclear Sweden AB s ( Euroclear ) account-based system, and no physical notes have been, or will be, issued. Clearing and settlement relating to the Bonds is carried out within Euroclear s book-entry system, as are payment of interest and repayment of principal. Investors are therefore dependent on the functionality of Euroclear s account-based system for timely and accurate payment. Bondholder representation The bond trustee will, in accordance with the Terms and Conditions, represents all bondholders in all matters relating to the Bonds. However, this does not rule out the possibility that the bondholders, in certain situations, could bring their own action against the Company. To enable the bond trustee to represent the bondholders in court, the bondholders may have to submit a written power of attorney for legal proceedings. Under the Terms and Conditions, the bond trustee will have the right in some cases to make decisions and take measures that bind all bondholders. The Terms and Conditions will include certain provisions regarding bondholders meetings. Such meetings may be held in order to resolve on matters relating to the bondholders interests. The Terms and Conditions will allow for stated majorities to bind all bondholders, including bondholders who have not taken part in the meeting and those who have voted differently to the required majority at a duly convened and conducted bondholders meeting. Consequently, the actions of the majority in such matters could impact a bondholder s rights in a manner that would be undesirable for some of the bondholders. Amended or new legislation This Prospectus and the Terms and Conditions are based on Swedish law in force at the date of approval and registration and the Issue Date, respectively. No assurance can be given on the impact of any possible future legislative measures or changes or modifications to administrative practices. Accordingly, amended or new legislation and administrative practices could have a negative impact on the regulatory conditions on which this Bond Issue was implemented, which in turn may adversely affect the bondholders ability to receive payment under the Terms and Conditions.

13

14 14 The Bonds in brief This section contains a general and broad description of the Bonds. It does not claim to be comprehensive or cover all details of the Bonds. Potential investors should therefore carefully consider this Prospectus as a whole, including the documents incorporated by reference (see below section Documents incorporated by reference ), before a decision is made to invest in the Bonds. The full Terms and Conditions for the Bonds can be found in section Terms and Conditions for the Bonds. Concepts and terms defined in section Terms and Conditions for the Bonds are used with the same meaning in this section unless otherwise is explicitly understood from the context or otherwise defined in this Prospectus. The Bonds are debt instruments (Sw. skuldförbindelser), intended for public market trading, which confirm that each Holder has a claim against the Company. The Company s board of directors resolved to issue the Bonds on 11 December The purpose of the Bond Issue was to raise funds to be used towards general corporate purposes of the Group and towards repayment of existing short term bank loans (approximately EUR 28,800,000 of the net proceeds from the Bond Issue was to be used to the latter). The Issue Date for the Bonds was 20 December The Bonds will mature on 20 December The aggregate nominal amount of the Bonds is maximum SEK 750,000,000 represented by Bonds denominated in SEK with ISIN SE , each with a Nominal Amount of SEK 1,000,000. The Bonds were issued at a price equal to 100 per cent of the Nominal Amount. As of the date of this Prospectus, SEK 500,000,000 of the bond loan has been issued. The Bonds have been issued in accordance with Swedish law and are connected to the accountbased system of Euroclear. This means that the Bonds are registered on behalf of the Holders on a securities account (Sw. VP-konto). No physical notes have been or will be issued. Payment of principal, interest and, if applicable, withholding of preliminary tax will be made through Euroclear s book-entry system. The Bonds constitute direct, unconditional, unsubordinated and, except for the pledge over the Intercompany Loans, unsecured obligations of the Company and shall at all times rank pari passu with all direct, unconditional, unsubordinated and unsecured obligations of the Company, except those obligations which are mandatorily preferred by law, and without any preference among them. The Company shall redeem all outstanding Bonds at 100 per cent of the Nominal Amount together with accrued and unpaid interest on the Final Redemption Date, unless previously redeemed, repurchased and cancelled or prepaid in accordance with section 9 Early redemption by request of the Company, section 12 The Group Companies purchase of Bonds, section 15 Change of Control or section 16 Acceleration of the Bonds of the Terms and Conditions. The Company may choose to redeem all, but not only some, of the Bonds on any Early Redemption Date at a redemption price amounting to the relevant Early Redemption Amount together with accrued and unpaid interest (see further section 9 Early redemption by request of the Company of the Terms and Conditions). Upon a Change of Control Event, each Holder has a right of pre-payment (put option) of its Bonds at a price of 101 per cent of the Nominal Amount together with accrued interest (see

15 15 further section 15 Change of Control of the Terms and Conditions). Payment of the Nominal Amount and/or interest will be made to the person who is a Holder on the Record Date immediately preceding the relevant payment date. Payments shall be made in SEK. The right to receive payment of the Nominal Amount is time-barred and becomes void ten years from the relevant redemption date, unless the limitation period is duly interrupted. The Bonds bear interest from, but excluding, the Issue Date up to, and including, the relevant redemption date at a floating interest rate of STIBOR (3 months) increased with 7.5 per cent per annum. For the purpose of calculating the relevant interest rate, STIBOR means the interest rate published on Reuter s page SIOR (or such other system or on such other page which may replace the mentioned system and page, respectively) at approximately 11 a.m. CET on each Interest Determination Date or, if no such quotation exists, in all cases as determined by the Issuing Agent, using the average of four Nordic commercial banks (determined by the Issuing Agent) quoted interbank market interest rates in Stockholm, Sweden, or, if only one or no such quotation is available, the interest rate which according to the Issuing Agent s assessment is the interest rate offered by Swedish commercial banks for lending SEK 100,000,000 for the relevant period of time on the interbank market in Stockholm, Sweden. The interest is paid quarterly in arrears on each Interest Payment Date and is calculated on an actual/360-days basis. The Interest Payment Dates are 20 March, 20 June, 20 September and 20 December each year (with the first Interest Payment Date on 20 March 2013 and the last Interest Payment Date being the Final Redemption Date). The right to receive payment of interest is time-barred and becomes void three years from the relevant due date for payment. Swedish Trustee AB (publ) is initially acting as Bond Trustee in relation to the Bonds, and, if relevant, any other matter within its authority or duty in accordance with the Terms and Conditions. Even without a separate authorisation from the Holders and without having to obtain any Holder s consent (if not required to do so under the Terms and Conditions), the Bond Trustee, or a person appointed by the Bond Trustee, is entitled to represent the Holders in every matter concerning the Bonds, the Terms and Conditions, the Intercreditor Agreement and the Intercompany Loans Pledge Agreement. The Bond Trustee is authorised to act on behalf of the Holders whether or not in court or before an executive authority (including any legal or arbitration proceeding relating to the perfection, preservation, protection or enforcement of the Bonds). Each Holder shall immediately upon request by the Bond Trustee provide the Bond Trustee with any such documents, including a written power of attorney (in form and substance to the Bond Trustee s satisfaction), as the Bond Trustee deems necessary for the purpose of carrying out its duties under the Terms and Conditions, the Intercreditor Agreement and the Intercompany Loans Pledge Agreement. The Bond Trustee is under no obligation to represent a Holder which does not comply with such request of the Bond Trustee. Each of the Company, the Bond Trustee and Holders representing at least 10 per cent of the total outstanding Nominal Amount, may request that a Holders meeting is convened or request a procedure in writing amongst the Holders (see further section 18 Holders meeting and procedure in writing of the Terms and Conditions). Such Holders meeting or procedure in writing may, upon votes representing a relevant majority of Holders eligible for voting, cause resolutions to be validly passed and binding on all Holders. An agreement was entered into between the Bond Trustee and the Company on or about the

16 16 Issue Date regarding, inter alia, the remuneration payable to the Bond Trustee. If the Bonds have been duly declared due and payable due to an Event of Default, the available funds shall firstly be applied towards payment of all costs and expenses incurred by and any remuneration payable to the Bond Trustee, under the Terms and Conditions and the Agent Agreement, and secondly in or towards payment of all sums owed by the Company to the Holders under the Terms and Conditions. The surplus, if any, shall promptly be transferred to the Company. If both the Nominal Amount and interest are due for payment and if the available funds are insufficient to discharge all the amounts due and payable, the available funds shall first be applied towards payment of interest and secondly towards payment of the Nominal Amount. The Bonds are freely transferrable and trading can occur from the Issue Date. Holders may, however, be subject to purchase or transfer restrictions with regard to the Bonds, as applicable from time to time under local laws to which a Holder may be subject (due to, e.g., its nationality, its residency, its registered address or its place(s) for business). Each Holder must ensure compliance with local laws and regulations applicable at their own cost and expense. All Bond transfers are subject to the Terms and Conditions and the Terms and Conditions are automatically applicable in relation to all Bond transferees upon the completion of a transfer. To simplify trading in the Bonds, the Company intends to apply for listing of the Bonds on NASDAQ OMX Stockholm in connection with the Swedish Financial Supervisory Authority s approval of this Prospectus. The number of Bonds being admitted to trading if the application is approved by NASDAQ OMX Stockholm is 500. The earliest date for admitting the Bonds to trading on NASDAQ OMX Stockholm is on or about 4 October Additional Bonds issued within the framework amount of SEK 750,000,000 under the Terms and Conditions may be admitted to trading pursuant to this Prospectus within one year after the approval of this Prospectus by the Swedish Financial Supervisory Authority. The fact that an application regarding listing of the Bonds on NASDAQ OMX Stockholm has been submitted does not mean that the application will be approved. The total expenses of the admission to trading of the Bonds are estimated to amount to SEK 483,000. The Terms and Conditions include an undertaking by the Company to list the Bonds on NASDAQ OMX Stockholm not later than one year after the Issue Date and to take all measures required to ensure that the Bonds, once listed on NASDAQ OMX Stockholm, continue being listed on NASDAQ OMX Stockholm for as long as any Bond is outstanding.

17 17 The Company and its operations History and development Kährs Holding AB (publ) is a public limited liability company registered in Sweden with registration number , having its registered address at P.O. Box 805, SE Nybro, Sweden. The Company was formed on 30 July 1996 and registered with the Swedish Companies Registration Office on 11 September The Company is governed by Swedish law including, but not limited to, the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)) and the Swedish Annual Accounts Act (Sw. årsredovisningslagen (1995:1554)). Share capital, shares and ownership structure According to its articles of association, the Company s share capital shall be no less than SEK 500,000 and not more than SEK 2,000,000 divided into no less than 10,000 shares and not more than 40,000 shares. The Company s current share capital amounts to SEK 500,000 divided among 30,000 shares, with one vote per share and each share having equal rights on distribution of income and capital. The shares are denominated in SEK. The Company is a wholly owned subsidiary of Nanna II SCA, which in turn is a wholly owned subsidiary of Saltri II Luxco S.à r.l.. The ultimate shareholders of the Company are however Triton Partners ( Triton ) through its Triton Masterluxco S.à r.l. (holding, indirectly, 61 per cent of the shares), Hartwall Capital including certain family members of Hartwall (holding, indirectly, 24 per cent of the shares), and the management of the Company (holding, indirectly, 15 per cent of the shares). The Company is the holding company of 20 subsidiaries of which 16 subsidiaries are operational. The Company holds no significant assets other than the investments in the operational Group companies and is therefore dependent upon the receipt of income related to the operation and ownership of these companies. The structure of the Group, including direct and indirect owners of Kährs Holding, is set out in the schedule on page 18 of this Prospectus. All subsidiaries are wholly-owned unless otherwise indicated.

18 18 *The remaining 1 per cent of the shares are held by Gustaf Kähr Verwaltungs GmbH. **The remaining 1 per cent of the shares are held by Oak Norge AS. Business and operations The object of the Company s business, which is set forth in paragraph 3 of its articles of association, is to purchase, sell, own and hold shares, bonds and other securities, to pursue financial activities (the Company shall, however, not carry any activities regulated in the banking and financing business acts) together with any other activities compatible therewith. Thus, the Company conducts its business through shareholding in its subsidiaries. The Group is a leading producer of wood floors. In addition to the production of wood flooring products, resilient flooring products constitute a significant part of the total offering of the Group. The Group is active within the whole product range including low-, mid- and high-end products. Hence, the Group offers complete solutions within flooring to its customers. The companies within the Group are active on all stages of the value-chain; research and development, sourcing, manufacturing, inventory and logistics and distribution and sales. The Group have production facilities in Sweden, Finland, Russia and Romania, but also source finished and semi-finished products from Poland and China. As of 31 December 2012, the Group had 1,612 employees. The Nordic region is the Group s primary market. The Group has strong market positions in Sweden, Finland, Norway and Russia and established positions in Germany,

19 19 Switzerland, the United Kingdom and the United States. The majority of the Group s sales derive from wood flooring. Recent events On 22 October 2012, Saltri II LuxCo S.à r.l. (the Purchaser ), HTT KUF Holding Oy Ab (the Seller ) and Triton Masterluxco 3 S.à r.l. entered into a share purchase agreement regarding the shares in Karelia Upofloor Oy (the Shares ), through which the Shares were acquired by the Purchaser from the Seller. The Shares were transferred to Kährs Holding on 3 December In immediate connection therewith, all shares in Oak Norge AS were contributed to Kährs Holding from Nanna II SCA. The consideration for the Shares was paid to the Seller through issuance of financial instruments, inter alia, ordinary shares in, and preferred equity certificates relating to, the Purchaser. Thus, Hartwall Capital (the ultimate shareholder of the Seller) became a minority indirect shareholder of the Company while Triton (the ultimate shareholder of the Purchaser) remained as majority indirect shareholder. The result of the transactions described above was that Aktiebolaget Gustaf Kähr and Karelia Upofloor Oy combined and became part of the same group. The combination is expected to generate significant synergies. There is a detailed integration plan under implementation in order to ensure that the envisaged synergies are achieved. The integration is progressing according to plan and the synergy potential has been reconfirmed. Litigation During the previous twelve months, the Company has not been, and is not aware of any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened) which may have, or have had in the recent past, significant effects on the Company s and/or the Group s financial position or profitability, apart from what is stated below in this section. Dispute between U.S. Customs and Kährs International Inc. Kährs International Inc. is currently involved in a dispute with the U.S. Customs regarding the classification of certain products and the obligation to pay import duties on such products retroactively. The U.S. Customs has claimed that certain products should be classified as plywood (entailing an import duty of eight per cent) due to a reclassification published in July Kährs International Inc. has historically ( ) classified the relevant products as building material (entailing an import duty of zero per cent), but changed the classification to plywood in 2006 when notified of the U.S. Customs position and the reclassification. Since becoming aware of the reclassification in 2006, Kährs International Inc. has paid all customs duties to the U.S. Customs. The classification case has been processed by the U.S. Court of Appeals for the Federal Circuit, based in Washington D.C., and the court s decision of 3 April 2013 ruled that the products were correctly classified as plywood by the U.S. Customs. In May 2013, Kährs International Inc. filed a motion for rehearing on the premise that the court had incorrectly interpreted certain case law, however, the motion for rehearing was denied. The U.S. Customs may consequently be entitled to claim import duties of eight per cent retroactively for the years , entailing additional costs of approximately USD 20 million (or more) plus penalties. It is likely that administrative procedures will be initiated by the U.S. Customs in this respect. In order to recover any amount from Kährs International Inc. in a Court action, the U.S. Customs would need to prove that Kährs

20 20 International Inc. failed to exercise reasonable care when importing the flooring products during that time period. Furthermore, Kährs International Inc. will likely have the possibility to mitigate and renegotiate a settlement with the U.S. Customs in order to avoid trial. However, in the event of a successful claim from the U.S. Customs, or if a favourable settlement with the U.S. Customs cannot be reached, Kährs international Inc. could be forced to file for bankruptcy, which in turn would lead to a need for a reorganisation of the Group s U.S business. A disadvantageous outcome may also have an adverse effect on the Group s financial position. Material agreements No company in the Group is party to any material agreement outside of the ordinary course of business which could result in such company having a right or an obligation that could materially affect the Company s ability to meet its obligations to the bondholders. Credit rating Neither the Company nor the Bonds have a credit rating from an international credit rating institute. Significant adverse changes There has been no material adverse change in the prospects of the Company since the date of publication of its last audited annual accounts and no significant change in the financial or market position of the Group since the end of the last financial period for which interim financial information has been published. Other than as stated above under sections Recent events and Litigation, there have been no recent events particular to the Company which are to a material extent relevant to the evaluation of the Company s solvency. Shareholders agreements As far as the Company is aware, there are no shareholder agreements or other agreements which could result in a change of control of the Company. Board of directors, senior management and auditors The business address for all members of the board of directors and the senior management is: Kährs Holding AB, P.O. Box 805, SE Nybro, Sweden. The telephone number is: +46 (0) The board of directors of the Company currently consists of 8 members. Information on the members of the board of directors and the senior management, including significant assignments outside the Company which are relevant for the Company, is set forth below. Board of directors Sven Gunnar Schough Born 1948 and of Swedish nationality. Chairman of the board of directors in Kährs Holding since Current board assignments include board member of A. Espersen, Puukeskus and Scandinavian Business Seating. Anne-Catherine Berner Born 1964 and of Swiss nationality. Member of the board of directors in Kährs Holding since Current board assignments include chairman of the board of Vallila Interior and board