Dexia SA (DEXB) completed agreements to sell its Belgian banking unit and French municipal-lending division to state-owned companies, moving closer to a full breakup as part of plans to rescue the lender.
Dexia Bank Belgium will be sold for 4 billion euros ($5.5 billion) to the Societe Federale de Participations et d’Investissement, or SFPI, acting on behalf of the Belgian state, Dexia said today in an e-mailed statement. The company will sell the French municipal-lending unit to Caisse des Depots et Consignations and La Poste.
In France, “it’s cherry-picking: The buyers are taking the assets, the know-how, but they don’t take the risk,” said Dirk Peeters, a Brussels-based analyst at KBC Securities who has a “hold” rating on Dexia.
Belgium and France are dismantling the firm, once the world’s leading lender to municipalities, after the company could no longer fund itself as the sovereign-debt crisis dried up short-term financing. The two countries, along with Luxembourg, agreed to provide a 90 billion-euro, 10-year guarantee to cover Dexia’s funding needs on Oct. 9.
Rescuing Dexia has become critical to preventing contagion in the region’s banking industry. Dexia’s balance sheet, with total assets of about 518 billion euros at the end of June, is about the size of the entire banking system in Greece and larger than the combined assets of financial institutions bailed out in Ireland in the last 2 1/2 years.
Dexia slipped 0.3 percent to 61 cents at 11:00 a.m. in Brussels trading, giving the company a market value of 1.2 billion euros.
Other Asset Sales
The proceeds of the sale of Dexia Bank Belgium will be principally allocated to the early repayment of loans granted by Dexia Bank Belgium to its related companies, Dexia SA and Dexia Credit Local.
Intra-group financing granted by Dexia Bank Belgium to other group entities will be maintained and gradually reduced according to the terms of the sale agreement, the company said.
Caisse des Depots, the manager of France’s principal state retirement funds, will own 65 percent of the French municipal business and La Poste 5 percent, Dexia said.
The company said the two sales would reduce its balance sheet by a total of 209 billion euros as of June 30, 2011. It will reduce the bank’s holdings of sovereign debt in Portugal, Ireland, Italy, Greece and Spain to 12 billion euros from 21 billion euros, the firm said.
Dexia will also study selling its DenizBank unit in Turkey, its 50 percent holding in RBC Dexia Investor Services and Dexia Asset Management, the company said.
Deixa Chief Executive Officer Pierre Mariani, 55, told Les Echos in an interview today that purchasers for other units being sold will be chosen by the end of the year. Mariani told the newspaper he’ll consider his role to be over once such agreements have been reached.
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