Dutch-Belgian financial services group Ageas said it is involved in a new dispute with its former Netherlands banking entity and the Dutch state over the fate of mandatory convertible securities issued while Ageas -- then known as Fortis -- was receiving government bailout funds.
Ageas said it has "received indications" that either the Dutch state or ABN Amro Bank NV (formerly Fortis Bank Nederland) are considering buying back the securities issued in 2007 with the objective of preventing their conversion into Ageas shares.
"Ageas has notified ABN Amro Bank NV and the Dutch Ministry of Finance that such a buyback transaction would constitute a breach of the contractual commitments undertaken by all issuing parties," the group said.
According to Ageas, the 2007 agreement would prevent the conversion of the securities into cash or anything but Ageas shares.
"Ageas is examining all options to avoid such a buyback," the group said.
The group added it would initiate legal proceedings against ABN Amro Bank NV and the Dutch state should buyback proceedings occur, and would claim compensation for breach of contract of up to 2 billion euros.
Ageas said the securities, which were issued on Dec. 7, 2007, are supposed to be converted into Ageas shares on Dec. 7, 2010 under the agreement.
This dispute over the fate of the mandatory convertible securities has no impact on an existing dispute in which Ageas is seeking 362 million euros in compensation from the Dutch state, Fortis Capital Co. and ABN Amro Bank NV related to the redemption of preference shares issued by Fortis Capital in June 2009, the group said.
Separately, Ageas said the Dutch state "has expressed its intention to possibly formalize and file two counterclaims" against Ageas for an estimated 675 million euros and 200 million euros, respectively. According to Ageas, the Dutch state would base these claims on "certain provisions" agreed to by Fortis Insurance NV, Fortis Insurance International NV and FBN(H) Preferred Investments BV in relation to the sale of the Dutch banking and insurance activities of Fortis on Oct. 3, 2008.
"Ageas will contest, in court of need be, the merits of these claims," the group said. "Furthermore, it deplores that the Dutch state would consider any actions that question the economic balance underlying the transaction" of Oct. 3, 2008.
According to Ageas, the group and the Dutch state "intend to examine whether it is still possible to find an amicable settlement to these issues."
In August, Ageas said its first-half net profit was cut in half as income from insurance operations in Belgium and the United Kingdom fell sharply. Ageas also saw investment results slide, as the group reported realized and unrealized losses of 51.6 million euros, compared with gains of 865 million euros a year earlier (BestWire, Aug. 25, 2010).
The multiline insurer's first-half net profit fell to 455 million euros from 895.8 million euros a year earlier. The group's insurance net profit in Belgium fell to 87.9 million euros from 195.4 million euros. In the United Kingdom, insurance profit fell to 8.3 million euros from 20.8 million euros. Insurance profit in continental Europe and Asia rose.
A year ago, Fortis said after completing a strategic review it would concentrate on core markets in Asia and Europe (BestWire, Sept. 30, 2009). It also said its current capitalization levels were adequate in the current economic circumstances and added it will "continue to proactively manage" its legacy issues in order to maximize long-term value.
In late September 2008, the governments of Belgium, Luxembourg and the Netherlands intervened to effectively bail out the company due to fluctuations in its share price. Fortis then went through a painful restructuring, with its Dutch operations being removed from the company by the Dutch government and the sale of its Belgian operations plus Fortis Bank to BNP Paribas attracting criticism from shareholders.
(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)