Holding Communal has received a payment deferral until Saturday, 22 October for a € 5m loan it received from the National Lottery and that was expiring yesterday.
Holding Communal, Dexia’s 14.3% shareholder, has € 1.6bn of debt which is covered by € 700m of assets and € 450m of guarantees from the regional governments. This leaves € 450m that is not covered. Failure to repay the loan would trigger a default. The Federal Government wants to lay the € 450m burden on the Regional Governments, which refuse.
A default of Holding Communal would trigger loan losses at (0,58 EUR, -16,71%) Bank Belgium, which has been sold to the Belgian Government.
A default of Holding Communal and the credit loss it would trigger at Bank Belgium would not have a direct impact on (the listed entity). There could however be several indirect impacts:
- A credit loss at Bank Belgiumwould reduce its valuation and hence reduce the likelihood that shareholders will see something from the earn-out arrangement linked to the sale of Bank Belgium;
- The 14.3% held by Holding Communal could upon seizure of collateral, potentially create a share overhang;
- If the Belgian Government bails out Holding Communal and Arco (13.9% shareholder) it could trigger a mandatory public offer on the remaining shares.
We maintain our Hold rating and € 1 target price but could see strong volatility in share price pending news flow in the coming days.