KEY POINTS:
ING New Zealand wants to wind up two suspended funds that invested in US credit markets, and is lending the funds $100 million so they can give the 8000 investors affected some cash upfront.
In March, ING announced it was suspending withdrawals from its ING Diversified Yield Fund (DYF) and the ING Regular Income Fund (RIF), which then together had $521 million under management. As at November 30 that figure had fallen to $273.5m.
ING NZ said today it wanted to wind down both funds, subject to approval by the funds' trustees and unit-holders. It envisages a managed process under which assets are sold over a period, which could be as long as four to six years.
"Our investors are asking if they can have access to some money. So we are putting that money up upfront," said Helen Troup, ING New Zealand's chief executive.
A unit-holder meeting will be held before March 31 to approve changes to the funds' trust deeds to allow the windups to occur.
It was not possible to say how much investors would finally get as that depended on what the assets sold for, but they would get some cash three to four weeks after the meeting financed by the $100m loan if the plan went ahead, said Troup.
The $100 million non-recourse loan approved by ING's shareholders would be made available to the funds at favourable commercial terms, and would have to be paid back before cash generated through the windup would be returned to investors.
The funds invest in senior secured loans, bonds, and so-called sub prime loans.
ING previously said that less than 10 per cent of the assets of each fund was in the subprime sector, often referred to by the financial press as toxic debt.
Though withdrawals from the funds have been suspended the funds have been making small distributions because they are still getting income from coupon payments on the debt.
ING said today that it was recommending that the funds be wound up given the on-going difficult market conditions.
There was a dramatic decline in the two funds' unit prices in November as collaterised debt obligation prices fell in October.
"Simply put, there was a wave of credit and structured credit security sellers responding to the heightened risk of a failure of the global banking system and the expected economic downturn," ING said in a fact sheet on the funds.
"The cash option that ING will be proposing is aimed at helping investors as we sell assets over an extended timeframe. It does not reflect the level of any final returns to investors," Troup said.
Assuming the trustee accepts the windup recommendation, all the details about the proposed windup options will be sent to investors.
Separately ING New Zealand said it was winding up it $27m Enhanced Yield Fund and the $8m Credit Opportunities Fund.
No further withdrawals or applications will be processed for either fund.
"Severe deterioration of market conditions during October and November has necessitated taking action on these two funds now to protect the interests of investors," said Troup.
In the new year, unit-holders in the two funds will be asked whether they wish for the funds to be wound up as soon as possible given current market constraints, or over time on a managed basis with greater flexibility over when the assets are sold.
The unit-holders are being advised of this decision and will be provided with additional information early in the new year to assist them to assess the windup options.
- NZPA
