ING has settled its dispute with the European Commission (EC) and reached agreement over an amended restructuring plan (an agreement in place as a condition of state aid received in 2009). The main element was the requirement to divest ING’s insurance and investment management businesses and ING Direct USA by end 2013, plus the sale of WestlandUtrecht Bank (WUB) by end 2012. The new plan extends the deadline for the insurance divestments, allows much of WUB's business to be retained and run down, and sets a repayment schedule over the next three years for ING to repay the remaining €3bn of state capital. ING cites "the market environment, economic climate and more stringent regulatory requirements" as key factors in the Commission's more flexible approach.
The main amendments to the restructuring plan are:
- The deadlines for divestment of various insurance and investment management businesses have been extended: more than 50% of Asia to be sold by end 2013, more than 50% of the US by end 2014, and more than 50% of Europe by end 2015, with the remaining stakes to be sold in the two to three years thereafter (ING still intends to IPO the US and European operations)
- Some of WUB's business will be transferred to the newly created Nationale Nederlanden Bank (NNB), to be sold after a capital injection of €350m from ING. However only €2.6bn mortgage loans will be transferred, with ING retaining the other €33.8bn, to be gradually wound down
- The repayment of the remaining €3bn of Dutch state aid + €1.5bn repayment premium is to be paid in four instalments of €1.125bn, with the final repayment in May 2015 (although management says it would like to repay sooner if possible) – the group announced yesterday (27 Nov) that it repaid the first instalment
- The bans on price leadership in various businesses and on acquisitions will be extended until November 2015
- The ban on bond calls extended until November 2014
Consequences for bondholders
- In general these changes are mildly positive as they give ING more flexibility to complete the restructuring - however the restructuring will now take longer to complete
- The main consequence for some bondholders is the extension on the ban for calling or buying back Tier 1 and Tier 2 securities until 18 November 2014 (from the original date of 18 November 2012), unless ING fully repays the state capital before then