(0,61 EUR, 0,00%) issued a press release with some extra clarifications of the ongoing break-up of the group:
The proceeds of the sale of Bank Belgium will be principally allocated to the early repayment of loans granted by Bank Belgium to S.A. and Credit Local. The Belgian State will indemnify the Group against any risk of loss associated to the performance of or other responsibilities arising from outstanding loans granted to Arco, Ethias and Holding Communal.
The negotiations with CDC and Banque Postale will result in the sale of respectively 65% and 5% of Municipal Agency (DMA), the Société de Crédit Fonciere of the Group dedicated to the refinancing of loans to local authorities. This will trigger a realised loss of € 680m based on June 30, 2011 figures and will reduce Dexia’s balance sheet by c. € 65bn and the liquidity requirements by c. € 10bn.
will extend to Municipal Agency a guarantee with respect to the performance and the legal risks associated to a portfolio of € 10bn of structured loans to French local authorities (the portfolios for which some “litigation” was started?). will also indemnify against losses in excess of 10bps on all outstanding loans, which represents 10 times more than the losses faced by Municipal Agency on an historical basis. would benefit from a counter guarantee from the French State on this same portfolio of structured loans up to 70% of losses over and above € 500m. This counter guarantee is subject to the approval of the European Commission.
The way we understand the “deal” CDC and Banque Postale will start a Greenfield public finance activity in France through a new commercial tool 65% owned by CDC and 35% owned by Banque Postale that will compete with CLF on the Frenchl market. Loans originated by the new entity will be refinanced through DMA (covered bonds) which is being stripped out of CLF. CLF will de-facto become a local public finance run-off vehicle with some side-activities in insurance (Sofaxis), real estate services (Exterimmo), automobile leasing (Dexia LLD) as well as personal services (Domiserve).
Dexia’s CEO, Mariani has been mandated to continue negotiating about the disposal of Dexia’s 50% stake in RBC Investor Services (RBC has a pre-emption), Asset Management and the 99.84% stake in DenizBank.
It seems that the divestment process and “cherry picking” of the Group continues which will eventually lead to the conversion of Group into a fixed income hedge fund.
We maintain our Hold rating and € 1 target price.