Transactions with Dutch State
Core Tier 1 securities issued to Dutch State
ING announced on 19 October 2008 that it had reached an agreement with the Dutch government to strengthen its capital position, creating a strong buffer to navigate the market and economic environment. ING issued non-voting core Tier 1 securities for a total consideration of EUR 10 billion to the Dutch State.
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. Furthermore, 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. A first tranche of EUR 1.225 billion was paid on 26 November 2012, following approval by the Nederlandsche Bank (DNB), the Dutch central bank. A second tranche of EUR 1.225 billion was paid on 6 November 2013, also following approval of DNB. DNB also approved the payment of a third tranche of EUR 1.225 billion, which was paid on 31 March 2014. This brought the total paid to the Dutch State to EUR 12.5 billion, including EUR 9.3 billion in principal and EUR 3.2 billion in interest and premiums. Each payment to the Dutch State requires prior approval from the DNB, at the time ING decides to propose such payment.
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.
As a result of the unwinding, the restrictions as part of the IABF agreement will no longer be applicable, including the right of the Dutch State to nominate two members for appointment to the Supervisory Board. The current State nominated member of the Supervisory Board will no longer have special approval rights regarding certain decisions and will, going forward, have a position equal to the other members of the Supervisory Board.
Transaction documentation can be accessed through the links below.