Transactions with Dutch State
Core Tier 1 securities issued to Dutch State
ING strengthened its capital position in the fall of 2008 by issuing EUR 10 billion of non-voting core Tier 1 securities to the Dutch State. These securities have been repaid and are no longer outstanding.
ING began repaying the Dutch State in December 2009 and completed its final payment in November 2014. All payments were approved by the Nederlandsche Bank (DNB), the Dutch central bank. The total amount repaid to the Dutch State on the core Tier 1 securities was EUR 13.5 billion, including EUR 10 billion in principal and EUR 3.5 billion in interest and premiums, giving the State an annualised return of 12.7%.
ING’s payments to the Dutch State were as follows:
- On 12 May 2009, ING paid an initial interest coupon of EUR 425 million.
- In December 2009, ING repurchased the first half of the core Tier 1 securities of EUR 5 billion plus a total premium of EUR 606 million.
- On 13 May 2011, ING exercised its option for early repurchase of EUR 2 billion. The total payment in May 2011 amounted to EUR 3 billion and included a 50% repurchase premium.
- On 19 November 2012, ING announced that, together with the Dutch State, it reached an agreement with the European Commission on significant amendments to the 2009 Restructuring Plan. As part of the agreement, ING filed a schedule for repayment to the Dutch State of the remaining EUR 3 billion in core Tier 1 securities plus a 50% premium, in four equal tranches in the next three years.
- The actual payments were:
- A first tranche of EUR 1.125 billion was paid on 26 November 2012;
- A second tranche of EUR 1.125 billion was paid on 6 November 2013;
- A third tranche of EUR 1.225 billion was paid on 31 March 2014;
- The final tranche of EUR 1.025 billion was paid on 7 November 2014, half a year ahead of the repayment schedule as agreed with the European Commission in 2012. This final payment was also approved by the European Central Bank.
Relevant documentation can be accessed through the links below.
Illiquid Assets Back-up Facility
ING and the Dutch government reached an agreement on 26 January, 2009 for an Illiquid Assets Back-up Facility (IABF) covering 80% of ING’s Alt-A mortgage securities. Market prices for these securities had become depressed as liquidity dried up, impacting ING’s results and equity far in excess of reasonably expected credit losses. The IABF transaction significantly reduced the uncertainty regarding the impact on ING of any future losses in the portfolio.
In connection with the sale of ING Direct USA, which closed in February 2012, ING reached an agreement with the Dutch State to adjust the structure of the IABF. The amendment served to delink the IABF from ING Direct USA by putting ING Bank in its place as counterparty for the Dutch State. Under the original agreement 80% of the Alt-A mortgage securities of ING Direct and ING Insurance Americas were covered. Only the part covering ING Direct USA, which covered approximately 85% of the total portfolio was adjusted. The ING Insurance Americas part of the IABF remained unaltered.
In order to ensure continued alignment between the interests of ING and the Dutch State with regard to the Alt-A portfolio, ING provided a counter guarantee to the Dutch State covering 25% of the 80% part of the Dutch State.
As per 14 November 2012, ING restructured the IABF to effectively delink ING US from the IABF as another step towards a planned IPO of ING US.
ING announced on 17 December 2013 that it has completed the agreement with the Dutch State on the unwinding of the Illiquid Assets Back-up Facility (IABF) as announced on 1 November 2013. The IABF in its original form is now terminated and all regular guarantee fee payments have been settled.
ING announced on 6 February 2014 that, together with the Dutch State, it had completed the unwinding of the Illiquid Assets Back-Up Facility (IABF), which was announced in November 2013. The Dutch State has sold the remaining USD 11.5 billion of securities in the portfolio through three auctions for an average price of 77.3%. The proceeds were used to pay off the remaining loans from ING. Together with the settlement of fees, the unwinding resulted in a cash profit for the Dutch State of EUR 1.4 billion.
Transaction documentation can be accessed through the links below.