Moody’s downgrades Dexia Banque Internationale à Luxembourg

The asset management arm of Dexia Group, Dexia Banque Internationale Luxembourg (DBIL), has been downgraded by Moody’s due to uncertainty about its potential buyers and the future of Dexia Credit Local.

Moody’s has cut DBIL’s rating from to Baa1 from A3 while its short and long-term senior debt ratings remain on review for downgrade.

Moody’s decision followed an announcement made by Dexia on December 8 stating it would not comment on the disposal process of DBIL. “Discussions are going on and Dexia will communicate on that disposal once a binding offer has been made,” the group said.

Yet Dexia had announced on October 10 that a binding offer from a potential group of buyers, rumoured to include a Qatari sovereign wealth fund and a participation of the Grand Duchy of Luxembourg, was expected to be submitted at the end of a two-week exclusivity period.

As discussions are still ongoing, Moody’s decided to to align DBIL’s senior debt ratings with those of Dexia Credit Local (DCL), which has also been downgraded.

Since Dexia announced the decision to dismantle the group and the agreement on a funding guarantee scheme to be provided by the three States, DCL’s senior ratings have been supported by the assumption that a comprehensive state-backed solution to this liquidity issue would be implemented shortly.

The agency said the downgrade of DCL’s ratings reflects the uncertainty over the comprehensiveness of the funding guarantee scheme that the Belgian, French and Luxembourg States intend to provide to DCL.

Moody’s added its principal concern on DCL has been its liquidity profile, a weakness which lies behind its current intrinsic financial strength rating of E+ (B2).

DCL’s subordinated debt rating was cut to B3 from Ba3 and DBIL’s subordinated debt and cumulative junior subordinated debt ratings to Ba3 from Baa1 and to B1 (hyb) from Ba1 (hyb) respectively.

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