State and ING agree on sale of Alt-A portfolio
Jeroen Dijsselbloem, Minister of Finance, and ING have agreed on the unwinding of the Illiquid Assets Back-Up Facility (IABF). This facility involves a portfolio of US Alt-A mortgage-backed securities. The termination of the IABF is in line with the government vision of unwinding government interventions in the financial sector and ending the related risks for the State as quickly as possible. The termination of the IABF means that the end of State support for ING is in sight, as Minister Dijsselbloem has written in a letter to the House of Representatives.
Mr Dijsselbloem intends to sell the Alt-A portfolio at a suitable price in the coming year. The revenue from the sale will be used to repay the existing loan to the State. At current market prices the portfolio has an estimated value of € 6.4 billion. The remaining loan comes to € 6.0 billion meaning the sale could deliver the State a profit of approximately € 400 million.
The talks with ING were focused on the desirability of sale while at the same time limiting the impact on the EMU balance. Each early termination of the IABF result in a negative impact on the EMU balance because Statistics Netherlands has entered the guarantee fees yet to be received as a asset of the State. The result of the talks with ING is that this year, ING will make a one-off payment of € 395 million to the State. In this way, the negative impact on the EMU balance in 2013 will be limited to € 223 million. The agreement has no consequences in terms of the spending framework because transactions connected to the financial crisis are not part of this framework.
The IABF is one of the measures the State took in 2008 and 2009 to contribute to restoring stability on the financial markets. The IABF involves a portion of the US Alt-A mortgage-backed securities (Alt-A portfolio) of ING which, at that time, was virtually impossible to trade.