ING unveils new rescue plan for CDO funds

Wednesday 25th February 2009

ING has come up with a new proposal for investors in its two distressed CDO backed funds.

Under the latest proposal investors can get a guaranteed return in five years' time or they can cash out now at a lower price.

The company has dumped an earlier proposal where it planned to make a $100 million non-recourse loan to investors, which would be repaid as the funds were wound up. Any remaining funds from this process would be returned to investors over time.

Under the proposal announced today, investors in the ING Diversified Yield Fund (DYF) and ING Regular Income Fund (RIF) will be receiving a proposal in which they can choose to be guaranteed a minimum price in five years' time for their units. The five-year price for the DYF is 83 cents per unit and 86 cents per unit for the RIF. This will see most investors receiving the bulk of their investment returned.

The five-year price is based on the amount of money that current investors put in, subtracting their total gross distributions and dividing that total by the number of units held.

Alternatively, investors who want access to their money sooner can opt to "cash out" their units for a lower amount equivalent to the guaranteed amount in today's dollar terms, which is 60 cents per unit for the DYF and 62 cents per unit for the RIF.

The cash out option is based on a net present value calculation of the five-year price and delivers liquidity to investors who choose this option.

"Unprecedented market conditions have created this unique situation in which these funds have been suspended for almost a year. We are now giving investors certainty, choice and equality regardless of how markets perform over the next five years," ING NZ chief executive Helen Troup says.

She believes the proposal recognises that not all investors have the same needs. Investors who can wait for five years will receive the bulk of their initial investment back. Investors who require cash sooner can opt to sell their units for the equivalent amount in today's dollars.

"We acknowledge there is anxiety among advisers and investors, have listened to the feedback, and believe that this offer underscores our commitment to ensuring the final proposal incorporated their comments," Troup said.

ING NZ's shareholders have committed to underwriting this offer to ensure that most investors will receive the bulk of their initial investment regardless of how markets perform over the next five years. The shareholders will shoulder the market risk, but if markets recover more than anticipated, then the investors will benefit from the upside.

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