More recent discussion on mandatory payment events as they relate to both ING and Aegon include:
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I did not want to quit tonight without suggesting a possible resolution of the ING deferral conundrum. I reached a level of comfort on how any Aegon deferral can be corrected to the advantage of the hybrid owners. More on ING and AEGON Stoppers
I would just reference those posts about Aegon. I last left the ING problem noting that the summary of the agreement between ING and the Dutch government provided that no coupon payments would be made to the Dutch government unless a dividend was paid on the ordinary shares in the immediately preceding year. Old Gamers Brain Short Circuits: More on the Priority Issue ING and Aegon. I did not want to leave the problem on that negative note. (ADDED 9/7/09: ING DID MAKE A PAYMENT TO THE DUTCH STATE ON A JUNIOR SECURITY IN MAY 2009 WHICH IS A MANDATORY PAYMENT EVENT: Sold 1/2 INZ (see disclaimer)/ING Paid the Dutch State in May 2009, with the only question being whether 2 or 4 mandatory payments were triggered by that payment)
ING did say that it was attempting to raise 6 to 8 billion Euros in asset sales to pay back the Dutch Government. WSJ.comIf and when that happens, how does such a payment relate to the Stopper provision in the hybrid prospectuses. I am just referencing the IGK prospectus when doing this analysis to keep it simple. In that prospectus, a mandatory payment event requires payment of four subsequent quarters of dividends and, as I interpret it today, all deferred dividends for the prior four quarters. I would call it a four back and four forward after the Mandatory Payment Event. The payment is triggered even if the deferral was mandatory. Mandatory Payment-Mandatory Deferral:
"If a Mandatory Payment Event occurs then, except as described in the next paragraph, the accrued and unpaid interest payable on the Securities on each of the immediately succeeding four consecutive interest payment dates will be mandatorily due and payable in full on those interest payment dates, notwithstanding that any Deferral Notice has been given by us in relation to such accrued and unpaid interest or the occurrence or continuance of any Required Deferral Condition (other than a Required Deferral Condition that occurs after the occurrence of the relevant Mandatory Payment Event, in which case such accrued and unpaid interest shall not be due and payable). We are not required to pay any deferred interest upon a Mandatory Payment Event."
Even if ING does not pay a dividend or other "payment" on a junior security, it will trigger the Mandatory Payment clause if: "... we or any of our subsidiaries redeems, purchases or otherwise acquires any Junior Securities, any Parity Securities..." Page S-6 424B5
So there it is. I wonder if Fitch and Moody's has considered any of these issues. What do you think? Out to lunch again?
Added 8/24/2009: I was asked about the backward looking provision requiring payment of four quarters of deferred dividends. I quoted this provision in earlier posts:
"Unless we have paid in full the accrued and unpaid interest on the Securities in respect of each of the immediately preceding four consecutive Interest Periods (or if four Interest Periods have not occurred since the issue date, since the Securities were issued), we will not recommend to our shareholders, and to the fullest extent permitted by applicable law will otherwise act to prevent, any action that would constitute a Mandatory Payment Event or a Mandatory Partial Payment Event (as described below)." Page S-6
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