Cash now, cash later: ING converts deal

Investors in INGs two frozen collateralised debt obligation (CDO) funds will be able to withdraw their money in two tranches under a revised offer put by the company yesterday.

Tuesday, March 24th 2009, 7:13AM

by David Chaplin

In a statement, ING New Zealand chief, Helen Troup, said “in response to positive feedback on the [original] proposal” the group would allow investors in the Diversified Yield Fund (DYF) and Regular Income Fund (RIF) to split their withdrawals between cash now and a further payment in five years' time.

Under ING's proposal late in February, the group offered to pay DYF/RIF investors 60-62 cents per unit if they chose to cash in their investments immediately or 83-86 cents per unit in five years' time. However, the initial deal required investors to select only one option.

ING has planned a national roadshow in May to showcase its offer to investors in the beleagured CDO funds ahead of unit-holder votes on the proposals in June.

“Although we are still developing the detail of our formal offer, we are continuing to communicate directly with investors and their advisers as and when we have new information,” Troup said in the statement. “We are currently developing comprehensive information packs so that investors are able to make an informed decision about our offer.”

In an analysis of ING's February proposal, Hawke's Bay-base adviser, Mike Shaw, estimated for investors who had been in the DYF since launch would face a loss of about 12-13% (depending on their tax rate) by accepting cash immediately. Shaw's figures show that by waiting five years the return for DYF investors would range from a loss of -.38% up to a 9.61% gain.

However, Shaw warned each investor would face different outcomes depending on when they first invested, their tax rates and other factors.

“There is no easy answer in analysing what is the best option for your clients other than provide them with their unique outcomes along with a recommendation,” Shaw says in his analysis.

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