ING to raise €7.5bn for bailout
Insurer seeks EU approval
October 27, 2009
By Martijn van der Starre London
ING Groep planned to raise €7.5 billion (R84bn) in a rights offering and sell its insurance units as it looked for EU approval for a taxpayer-funded bailout, the Dutch financial services firm said yesterday.
ING shares slumped after it said it planned to sell shares to finance the repurchase of €5bn of core tier 1 securities held by the government. It would shed the insurance units through initial public offerings and disposals over the next four years.
The measures are part of a restructuring plan filed with the European Commission to garner approval for state aid, including a €10bn cash injection and guarantees on €21.6bn of mortgage assets.
ING fell 8.5 percent to €10.67 by 11am in Amsterdam, valuing it at €22bn. Before yesterday, ING had risen 59 percent this year, beating an 18 percent rise in the 36-member Dow Jones Stoxx 600 insurance index.
"ING's settlement with the commission looks less favourable than we hoped," said analyst Chris Hitchings at Keefe, Bruyette & Woods. He had estimated a share sale of €5.5bn.
ING was created by the 1991 merger of insurer Nationale Nederlanden and NMB Postbank Group. Chief executive Jan Hommen said he would try to sell the insurance firm as a single entity, not break it up.
"What used to be a benefit became a negative," Hommen said. "Ideally, it's nice to keep the firms together, but the market will have to tell us what's possible and what the price is."
ING said it had reached a deal with the Dutch government to allow early repayment of the aid, and it planned to repurchase the core tier 1 securities this year. In addition to the face value of the securities, ING would have to pay a premium and accrued interest of as much as €950 million.
After the share sale, further repayments would be financed from divestments and internal resources, ING said. Hommen declined to say when the rest of the aid would be repaid.
The commission would require ING to sell its US online banking business by the end of 2013. The firm expected to get final approval for the restructuring plan before a November 25 shareholders meeting.
"We have made very good progress in contacts with the Dutch authorities in recent weeks on restructuring ING and the valuation of impaired assets," said commission spokesman Jonathan Todd. "We will take a decision in the next few weeks."
The commission would also require ING to make more payments to the government for a deal that transferred the risk on €21.6bn of mortgage assets to the state earlier this year, ING said. The annual extra payments would amount to a net present value of €1.3bn, which ING would book as a one-time charge in the current quarter.
Analyst Maarten Altena at SNS Securities said: "Another charge can be expected from the bankruptcy of DSB Bank, the lender seized by the Dutch central bank earlier this month following a run on its deposits, which we expect to be €200m."
ING said it would probably post a third-quarter profit, excluding divestments and special items, of €750m, compared with a €568m loss in the same period last year. - Bloomberg
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