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 1,125 million was paid on 26 November 2012, following approval by the Nederlandsche Bank (DNB), the Dutch central bank. A second tranche of EUR 1,125 million was paid on 6 November 2013, also following approval of DNB. This brought the total paid to the Dutch State to EUR 11.3 billion, including EUR 8.5 billion in principal and EUR 2.8 billion in interest and premiums. Each subsequent payment to the Dutch State requires prior approval from the DNB, at the time ING decides to propose such payment.
- ING press release ING to strengthen core capital by EUR 10 billion, 19 October 2008
- Term sheet Core tier 1 securities, 19 October 2008
- DNB press release 19 October 2008
- Press presentation ING strengthens core capital, 20 October 2008
- Analyst presentation ING strengthens core capital, 20 October 2008
- ING press release ING to launch rights issue to repay half of State capital injection, 26 October 2009
- ING press release ING to repay Dutch State EUR 5 bn Core Tier 1 securities on 21 Dec., 11 December 2009
- ING press release ING completes rights issue and State repayment, 21 December 2009
- ING press release ING to repurchase EUR 2 bn core Tier 1 securities from Dutch State on 13 May, 7 March 2011
- ING press release ING pays EUR 3 billion to Dutch State for second tranche of core Tier 1 securities, including a 50% premium, 13 May 2011
- ING press release ING reaches agreement on amended EC Restructuring Plan, 19 November 2012
- ING press release ING pays EUR 1,125 billion to Dutch State, 26 November 2012
- ING press release ING and Dutch State reach agreement on unwinding of Illiquid Assets Back-up Facility
- ING press release ING records 3Q13 underlying net profit of EUR 891 million
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.
On 1 November 2013, ING announced that it has reached an agreement with the Dutch State on the unwinding of the Illiquid Assets Back-Up Facility (IABF). Market developments now allow the unwinding of the facility, including selling the securities, with a cash profit for the Dutch State. Under the announced agreement, the IABF in its current form will be terminated, regular fee payments will be settled and the other restrictions as part of the IABF agreement will no longer be applicable. The Dutch State intends to sell the Alt-A securities in the market in the coming year. Announcements on process or actual transactions will be made if and when appropriate by the Dutch State Treasury Agency. At current market prices, the portfolio has a market value of approximately EUR 6.4 billion. Proceeds of divesting the securities at that price would enable the State to pay off the remaining loan from ING of EUR 6.0 billion, leaving a direct cash profit for the State of approximately EUR 0.4 billion.
In addition, under the terms of the agreement, ING will transfer to the State EUR 0.4 billion of the remaining provision it formed in 2009 for the additional guarantee fees. The release of what remains of the provision after this transfer will not have a material impact on ING’s results. Unwinding the IABF will also result in eliminating a counter-guarantee that ING extended to the Dutch state in connection with the divestment of ING Direct USA in 2012. This will reduce ING Bank’s Risk Weighted Assets by EUR 2 billion. On a pro forma basis, the unwinding of the IABF is expected to add approximately 10 basis points to ING Bank’s core Tier 1 ratio. The terms of the agreement announced today have been discussed with the European Commission, but are still subject to approval by the EC.
Transaction documentation can be accessed through the links below.
- Press release ING 26 January 2009
- Analyst presentation
- Press release ING 26 October 2009
- Press release ING 16 June 2011
- Amended and Restated Guarantee Agreement 13 November 2012
- Amended and restated illiquid assets backup facility agreement 13 November 2012
- Press release ING 1 November 2013