CRISIS-HIT Franco-Belgian bank Dexia has secured temporary financing guarantees from Belgium, France and Luxembourg to keep it running while the countries cement the bailout they put together in October.
Dexia said a draft temporary guarantee agreement had been submitted to its board of directors and to the European Commission, which will need to determine whether the rescue complies with state aid rules.
Dexia shares closed up 0.26 per cent at €0.379 yesterday.
KBC Securities said the agreement gave Dexia temporary relief, although it was still tapping a considerable amount of funds from the European Central Bank and the guarantee fee was a potential negative.
Dexia was rescued by the three states in October, receiving €90 billion of guarantees to cover its borrowings and accepting that Belgium would take over its operations there for €4 billion.
However, these guarantees have yet to take effect, sparking talk the states were wrangling about how the burden should be shared. Reports of fresh talks last month hit both Belgian government bonds and the euro.
Dexia said the temporary guarantee agreement would cover as much as €45 billion of its financing needs up to May 31st. The guarantees would cover financial contracts and securities with a maturity of three years or less.
Dexia will provide the three states with collateral for some of the guaranteed obligations issued, a fee of €225 million, and monthly fees based on the outstanding amount of guaranteed debt.
Dexia said the agreement was a draft and the terms might be reviewed. Its board would reach a decision when terms were finalised.
“The board of directors draws the urgent attention of the states and of the European Commission to the need to conclude a temporary and then final agreement as rapidly as possible so that the restructuring plan of the Dexia Group can be carried out in an orderly manner,” it said.
Dexia said the longer-term guarantee agreed in October was irrevocable and the allocation between governments of 60.5 per cent, 36.5 per cent and 3 per cent for Belgium, France and Luxembourg, respectively, remained unchanged. – (Reuters)
