ING/ANZ make $400m final assault on CDO funds

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Joint venture partners ING and ANZ have stumped up with $400 million in a revised offer to investors in ING's two CDO funds that will sidestep the need for a unitholder vote and stave off further legal action.

Thursday, May 28th 2009, 12:40PM

by David Chaplin

In the offer released this morning ING/ANZ gave investors in the Diversified Yield Fund (DYF) and Regular Income Fund (RIF) three choices: cash-out now under the same terms as previously - ie a unit price the DYF and RIF of 60c and 62c respectively; a new five-year option where investors can sell units at the cash-out price with the proceeds transferred to a no-fees ANZ on-call account with an interest rate of 8.3%, or; hang onto existing units in the hope that the underlying investments will improve.

Under the previous ING offer the two CDO funds were to be wound up, requiring a unitholder vote, with a guaranteed five-year unit price of 83c for the DYF and 86 cents for the RIF. According to ING/ANZ estimates, the new five-year offer will see investors receive a gross return of 91c for DYF units and 94c per unit for the RIF.

However, if investors choose to accept the cash-out and five-year offers they will forfeit any claims to further legal action against ING or ANZ.

"... you will be required to give a release whereby you settle and release all claims, currently known and unknown, in connection with that fund and your investment in it," the ING/ANZ  offer summary says.

In a statement, ANZ  head of private banking, John Brody, said: "With the agreement of the Banking Ombudsman, ANZ customers will have the opportunity to accept the offer being made by ING New Zealand and, for a limited period, ask ANZ, and the Banking Ombudsman if necessary, to consider complaints that are not addressed through the ING offer."

Helen Troup, head of ING NZ, said while the revised offer "won't please everyone" the group was doing "all it could" to rebuild trust with investors.

Troup said the new terms were not designed to avoid a unitholder vote "it just worked out that way".

She said the Commerce Commission, which is currently investigating ING/ANZ over the CDO funds, was aware of the revised offer.

According to Troup, the updated offer would see investors receiving three- or more times the current value of the DYF/RIF products. At presstime the DYF unit price sat at 22.88c while the RIF was valued at 19.21c per unit.

She said modeling of the underlying investments has indicated the two CDO funds were "most unlikely" to approach recover to the levels comparable to the new offer.

"There is still value in the funds - they won't go to zero," Troup said.

ING was also considering shifting the decision-making responsibilities for the DYF and RIF back to New Zealand from Australia. As well, ING could wind up the special purposes offshore vehicle used to manage the funds, which is currently housed in the Cook Islands.

Troup said ING would be presenting its new plan to investors and advisers over the coming weeks.

The offer closes on July 13 this year.

Click here for a Summary of the Offer

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