Dexia issued a press release reminding the terms and scope of the sale of Dexia Banque Internationale a Luxembourg (BIL) to Precision Capital and the Grand Duchy of Luxembourg. The sale and purchase agreement was signed on 5 April, 2012 and entails the disposal of some assets prior to disposal:
- 51% in Dexia Asset Management ("DAM");
- 50% holding in RBC Dexia ("RBCD");
- Dexia Bank Lettre de Gage ("DLG");
- 40% stake in Popular Banca Privada ("PBP"); and
- a portfolio of non-strategic assets with a nominal value of € 8.2bn.
These transactions significantly impacted the non consolidated accounts and the capital of the BIL at the end of 2011. The sale of the legacy portfolio to DCL had a negative impact of € 1.9bn. The sale of some other entities (DAM and RBCD) will provide a partial offset as they will generate a gain.
Dexia undertook to the purchasers of the BIL to transfer the entity with a Common Equity Tier 1 ratio of 9% calculated on closing under BasleIII norms. At present it appears that this ratio will not be achieved at closing and that an increase of the capital of BIL will be necessary pre-closing, the amount being under consideration and negotiation.
The further divestment (“cherry picking at deep discount prices”) continues and would require the recapitalisation of Dexia BIL at a time where Dexia Group has already negative IFRS equity.
We maintain our Reduce rating and € 0.10 target.