OREANDA-NEWS. This commentary replaces the version published earlier today to correct the share of bondholders' approval votes within the quorum in the second last paragraph.

Fitch Ratings says ING Bank N.V.'s (ING; A/Stable/F1/a) mortgage covered bonds' rating (AAA/Stable) will not be affected by the potential introduction of a 12-month extendible maturity. The proposed change is contingent on investor approval.

ING is seeking investor consent for the implementation of a 12-month extendible maturity (soft bullet) for most of its hard bullet benchmark covered bonds series denominated in euro, which constitute 63% of the outstanding covered bonds balance under ING Bank's EUR 35bn hard and soft bullet covered bond programme. The remaining hard bullet series are not part of the consent solicitation.

In Fitch's view, the proposed change would mitigate liquidity gaps in the programme. Extendible maturities create a period during which liquidity can be raised from the cover pool should the cover pool become the sole source of payment. The proposed maturity extension provides a comparable level of protection against liquidity risk as the current liquidity provision in the form of a 12 month pre-maturity test.

The current Discontinuity Cap (D-Cap) for the programme would remain unchanged at '4' (moderate risk). It reflects Fitch's assessment of the asset segregation, liquidity gap and systemic risk and privileged derivatives components as moderate risk, and the alternative management component as low risk.

Maturity extensions would not impact Fitch's assessment of the amortisation test's effect on the breakeven asset percentage (AP). As a result the proposed change is unlikely to impact the programme's 'AAA' breakeven AP, which is currently driven by the amortisation test.

Fitch does not view this planned modification of the bonds' terms and conditions as a default or distressed debt exchange (see 'Distressed Debt Exchange' dated 30 June 2014 at www.fitchratings.com). This is because the new provisions are not aimed at preventing an imminent default of any covered bond issuer and will only be implemented if they are approved by two-thirds of the votes cast by the required quorum.

At present, more than half of covered bonds programmes rated by Fitch include extendible maturities, with the 12-month extension being the most common. The maturity characteristics of all programmes publicly rated by Fitch can be found in the Covered Bonds Surveillance Snapshot, dated 29 July 2015 on www.fitchratings.com.