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Rating Action:

Moody's downgrades various subordinated securities of ING

20 Aug 2009

London, 20 August 2009 -- Moody's Investors Service today downgraded the preference stocks of ING Groep N.V. to Ba1 from A3. Moody's also downgraded the subordinated debt securities of ING Verzekeringen N.V. to Ba1 from A3, the trust preferred securities of ING Capital Funding Trust III to B1 from A3 and the preferred stocks of Equitable of Iowa Companies Capital Trust II to Ba1 from Baa1. The ratings for these securities remain under review for possible further downgrade.

There has been no change to the A1 senior rating and A2 dated subordinated debt rating of ING Groep N.V., the Aa3 senior rating and the C+ Bank Financial Strentgh Rating (BFSR) of ING Bank N.V. and the A2 senior rating of ING Verzekeringen N.V., which continue to carry stable outlooks, except for ING Bank's BFSR, which continues to carry a negative outlook.

Moody's action today reflects our assumption of a high probability of coupon suspension on these securities as a result of the ongoing discussion between ING Groep and the European Commission ("EC") on its state aid package and follows Moody's press release entitled "Moody's sees broader impact on hybrid ratings triggered by EC's state aid reviews", published on 19 August 2009.

Moody's understands that ING Groep is currently discussing with the EC the approval of its restructuring plan following the support received by the Dutch State, encompassing a EUR10.0 billion capital injection received at the end of 2008 and an illiquid assets back-up facility agreed earlier this year covering 80% of ING's EUR27.7 billion Alt-A mortgage securities.

Antonello Aquino, VP Senior Credit Officer at Moody's, commented: "In Moody's view, there is a high probability that the EC could advise ING Groep to refrain from paying coupons on various subordinated securities of the group, in line with its objective of burden sharing. Most of ING's subordinated securities are cumulative in nature and recently the EC asked KBC, a Belgian bank, to refrain from paying coupons on some of its cumulative hybrids."

Moody's downgraded to Ba1 all cumulative securities with optional deferral provision reflecting the rating agency's assumption of a high probability of omission of coupons. The rating agency notes that the coupon payments on these instruments are cumulative, thereby limiting the loss severity of a coupon deferral if this were to occur. Moody's assigned the same rating to the securities of both the operating companies and holding companies, as it deems the risk of omission to be similar.

Moody's downgraded to B1 the only non-cumulative trust preferred securities issued by ING Capital Funding Trust III. Under a going concern assumption, the expected loss for investors in this non-cumulative instrument is therefore higher than for cumulative securities.

All of these securities contain dividend pusher provision; nevertheless as the group announced that no dividend would be paid to common shareholders, the dividend pusher is no longer an obstacle to non payment.

The review for possible downgrade on these instruments reflects the ongoing discussion between ING Groep and the EC and the prospect of potential further downgrade in case of an actual suspension of coupons.

The following instruments have been affected by this action:

ING Groep N.V.

• Cumulative perpetual preference stocks with optional coupon deferral provision: Ba1 from A3. The rating remains on review for possible downgrade

ING Verzekeringen N.V.

• Cumulative dated subordinated debt securities with optional coupon deferral provision: Ba1 from A3. The rating remains on review for possible downgrade

ING Capital Funding Trust III (guaranteed by ING Groep N.V.)

• Non-Cumulative trust preferred securities: B1 from A3. The rating remains on review for possible downgrade

Equitable of Iowa Companies Capital Trust II

• Cumulative preferred stock with optional coupon deferral provision: Ba1 from Baa1. The rating remains on review for possible downgrade

RATINGS AFFECTED

The following ratings were downgraded and placed under review for possible downgrade:

ING Groep N.V.: preference stocks to Ba1 from A3;

Perpetual subordinated bonds USD 1,500 million 7.375% (CUSIP: 456837707);

Perpetual subordinated bonds USD 1,045 million 6.375% (CUSIP: 456837608);

Perpetual subordinated bonds GBP 600 million 5.140% (ISIN: XS0246487705);

Perpetual subordinated bonds EUR 300 million 4.176% (ISIN: XS0221619033);

Perpetual subordinated bonds USD 300 million 6.125% (CUSIP: 456837509);

Perpetual subordinated bonds USD 1,000 million 5.775% (CUSIP: 456837AC7);

Perpetual subordinated bonds EUR 1,000 million floating rate (CUSIP: NL0000116127);

Perpetual subordinated bonds USD 500 million 6.2% (CUSIP: 456837400);

Perpetual subordinated bonds EUR 750 million floating rate (ISIN: NL0000113587);

Perpetual subordinated bonds USD 1,100 million 7.2% (CUSIP: 456837301);

Perpetual subordinated bonds USD 800 million 7.05% (CUSIP: 456837202);

Perpetual subordinated bonds USD 1,500 million 8.50% (CUSIP: 456837806);

Preferred Stock EUR 1.5bn million 8% (ISIN: XS035668721)

ING Verzekeringen, N.V.: subordinated debt to Ba1 from A3;

Subordinated EUR 1bn dated due 07/05/2027 (ISIN: XS0147306301);

Subordinated EUR 1.250bn dated due 21/06/2021 (ISIN: XS0130855108)

ING Capital Funding Trust III; guaranteed (by ING Groep N.V.): trust preferred securities to B1 from A3;

Trust Preferred Securities USD 1,500 million (CUSIP: 44978NAA3)

Equitable of Iowa Companies Capital Trust II: preferred stock to Ba1 from Baa1

Backed Preferred Stock 50m USD (CUSIP: 294514AC8)

The last rating actions took place on 28 January 2009, when Moody's downgraded the bank financial strength rating of ING Bank N.V. to C+ from B- and its long-term senior debt ratings to Aa3 from Aa2. The senior debt of ING Verzekeringen N.V. was also downgraded by one notch to A2 from A1. At the same time, Moody's downgraded the senior debt rating of ING Groep N.V., the main holding company, to A1 from Aa3. Moody's also downgraded the insurance financial strength ratings (IFSRs) of ING's U.S. life insurance operating companies to A1 from Aa3, concluding the review on these ratings. Moody's rating actions followed the release of preliminary Q4 2008 results and reflected the sharp deterioration in group profitability, in both the banking and insurance operations. The rating agency expects the more negative trend may continue given the Group's business and asset exposure and the current and prospective economic environment.

The principal methodologies used in rating the issuers covered by this press release are "Moody's Global Rating Methodology for Life Insurers", "Moody's Global Rating Methodology for Property and Casualty Insurers", "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Rating Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Credit Policy & Methodologies directory.

Based in Amsterdam, ING Groep N.V. had total assets amounting to EUR1,188 billion at end-June 2009 and reported a net loss of EUR722 million for the six months ending June 2009.

Based in Amsterdam, ING Banking activities had total assets amounting to EUR912 billion at end-June 2009 and its Tier 1 ratio stood at 9.4%, on a Basel II basis. In H1 2009, the banking activities of ING Groep reported a net profit of EUR232 million.

The insurance activities of ING Groep had total assets amounting to EUR287 billion at end-June 2009 and the insurance capital coverage ratios for insurance activities was 257%. In H1 2009, the insurance activities of ING Groep reported a net loss of EUR955 million.

London
Antonello Aquino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Simon Harris
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades various subordinated securities of ING
No Related Data.
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