Dexia obains €5.5bn in extra French, Belgian taxpayer support
Crisis hit Dexia Group has had to beg for a further €5.5bn in state support from Belgium and France in exchange for preference shares, after it reported a negative net asset position in its latest results.
The negative net position resulted mainly from a significant write down in the value of its holding in Dexia Crédit Local, which in turn was linked to amendments put forward by the governments of Belgium and France to the European Commission regarding the Goup’s business plan.
A previous plan was put forward by Belgium, France and Luxembourg in March 2012 to the EC – which monitors state aid to companies. But the most recent amendments would significantly hit future profitability, the bank said in a statement today.
The three key amendments include: changes that would force the bank to rely more on short and medium term market funding rather than central bank funding, but which would be more costly; a lowering of the ceiling of liquidity guarantees from Belgium, France and Luxembourg to €85bn from €90bn; and modification of the plan to dispose of Dexia Municipal Agency, which is now being affected by changes to the way local public sector finances are organised in France.
Dexia must now call an extraordinary general meeting for its shareholders to discuss the latest events. Because of the threat of bankruptcy now hanging over the business, and by implication the threat of wider systemic risk, Belgium and France moved to inject more capital into the business, Dexia said.
Full details of today’s announcement, including the non-audited financial accounts for the first nine months of 2012, and the third quarter, are available here: http://hugin.info/152020/R/1655839/535334.pdf