The Belgian state is acquiring ( EUR, 0,00%) Banque Belgium and its subsidiaries –except 49% owned AM – for a total consideration of € 4bn and an earn-out mechanism in favour of S.A. in the event of a potential resale within 5 years. Based on June 30, 2011 figures it would trigger a c. € 3.8bn loss and reduce risk weighted assets by € 42bn. The negative AFS reserve would be reduced by € 2.2bn. This implies that Group would see its net equity (€ 6.9bn) decline by c. € 1.6bn.
The Belgian, French and Luxembourg states will jointly guarantee the interbank and bond funding for a period of 10 years raised by S.A. and its subsidiary CLF. The burden sharing is split as follows: Belgium 60.5%, France 36.5% and Luxembourg 3%. The ceiling for this refinancing guarantee is maximum € 90bn. The guarantee fee will be communicated as soon as possible (whisper figure: upfront € 270m for Belgium –but not yet confirmed – variable cost “if any” unknown).
Dexia’s CEO has been instructed to enter into negotiations with CDC and Banque Postale to conclude an agreementin relation to the financing of French local authorities, including the backing of Municipal Agency by CDC. This would reduce S.A.ST funding requirement by c. € 10bn.
will continue to negotiate on an exclusive basis (two weeks starting October 10) with a view to the disposal of BIL (which owns Investor Services and half of AM).
At this stage we have many questions left unanswered about:
- Potential divestment of CLF and pricing;
- Potential sale of Crediop & Sabadell to S.A. and pricing;
- Potential sale Municipal Agency and pricing;
- Potential sale DenizBank and pricing;
- Are there / will there be any side-deals with the Belgian reference shareholders (Holding Communal, Arco and Ethias) and what will happen with the € 450 guarantee granted to Holding Communal;
- Who will assume the Banque Belgium credit loss (up to € 1.2bn) if Holding Communal defaults ( contract with Belgian Government provides in an immunization clause for Group but linked to 2008 capital increase;
- What will be the guarantee cost?
The (lack of) information currently available does not allow us to assess the risks and the valuation of the fixed income hedge fund that is to become.
We do not give a rating or target price given lack of sufficient information.