Jan 26 (Reuters) - Dutch financial services group ING Group ING.AS, which announced a 2008 loss of 1 billion euros ($1.3 billion) on Monday, will tap into a Dutch state guarantee scheme for its troubled loan portfolio. [ID:nLQ108896]
Here are some facts on ING’s deal with the Dutch government:
* The Dutch state takes on the risks of 80 percent of ING’s 27.7 billion euro portfolio of Alt-A residential mortgage backed-securities, entitling it to 80 percent of profits or losses made on the assets
* Risk transfer takes place at 90 percent of par value, which is 30 billion euros.
* Effectively, ING has a guarantee for 21.6 billion euros of the loans (30 billion multiplied by 0.8, multiplied by 0.9), on which ING receives an interest payment roughly similar to a U.S. treasury yield, which will be lower than the yield on the Alt-A assets.
* ING has written down its Alt-A assets to $35.1 billion from $39 billion before transfer part of the risks to the Dutch government.
* ING’s interest income will initially decline by 400 million euros per year because of the deal; over time the negative impact will decrease as the Alt-A assets are redeemed.
* ING pays a guarantee fee to the state and receives a management fee of 700 million euros based on current values.
* The transaction has no impact on ING’s first-quarter profit and loss account. The discount selling price and guarantee fee paid by ING cancel out the management fee paid to ING and interest rate differential payment, all in net present value terms.
* There will be less volatility on ING’s results and equity, and it will raise ING’s equity by 5 billion euros because there will be about 15 billion euros less risk-weighed assets on ING’s balance sheet
* ING will make at least 25 billion euros available for lending to Dutch companies and consumers in 2009 on market terms.
* ING’s executive board will forego all bonuses for 2009.
Sources: ING statement and analyst presentation; Dutch Finance Ministry statement
$1=.7719 Euro Compiled by Gilbert Kreijger; Editing by Sharon Lindores