ING prices $11.2 billion cash call at steep discount

People walk in the ING office in Taipei, October 20, 2008.

AMSTERDAM (Reuters) - ING priced a rights issue intended to raise 7.5 billion euros ($11.2 billion) at a steep discount, hoping to reduce its dependence on state aid by tapping shareholders made warier by Dubai's debt crisis.

ING, which is issuing 1.768 billion new shares on top of more than 2 billion shares already outstanding, joins a flurry of European financial institutions offering discounted shares to repair balance sheets or pay back governments that bailed them out during the peak of the financial crisis.

The debt crisis that engulfed Dubai this week likely depressed ING's 4.24 euro issue price but would not prevent the cash call, which is set to become the eighth-largest rights issue globally, analysts said.

"You have to make a decision at some point and I think ING has agreed with the underwriters that this was the best plan, which had sufficient chances to be successful," analyst Maarten Altena of SNS Securities said.

Amsterdam-based ING will use the bulk of the proceeds to repay half of the 10 billion euros in state aid it got last year. The bank and insurer is splitting its operations as part of a restructuring deal with the European Commission reached in light of the aid payment.

37 PERCENT DISCOUNT

The offer price represents a 52.4 percent discount to Thursday's closing price of 8.916 euros and a 37.3 percent discount to the theoretical ex-rights price (TERP).

The TERP discount compares with a 38.6 percent discount for UK banking group Lloyds' rights issue on Tuesday, 40.6 percent for Sweden's Swedbank in September, and close to 30 percent for French rivals Societe Generale and BNP Paribas last month.

"This sounds like quite a cheap deal. They are trying to make it attractive," said Rob Koenders at Dutch asset manager Harmony Vermogensbeheer, which owns ING shares and says it may subscribe to the offering.

ING shares were down 1 percent at 8.82 euros by 1003 GMT (5:03 a.m. EST) after falling as much as 5.7 percent in early deals and compared with a 0.24 percent rise in the DJ Stoxx European Insurance index.

ING shares have fallen 24 percent since the breakup announcement last month due to uncertainty about the company's value after the split and dilution concerns. The insurance index has fallen 9 percent over the same period.

ING is offering 6 new shares for every 7 held. The subscription and trading periods for the rights run from November 30 until December 15. Any rights that have not been exercised will offered in a rump offering on December 16, ING said.

The issue is fully underwritten by syndicate of banks led by Goldman Sachs and J.P. Morgan, while Goldman Sachs, ING Bank and J.P. Morgan are joint global coordinators.

(Editing by John Stonestreet)