Categories
Uncategorized

Dexia to provide $5 bln credit

Dexia to provide $5 bln credit

BRUSSELS, June 23 (Reuters) – Belgian-French financial services group Dexia said on Monday it would provide a $5 billion credit line to its U.S. bond insurance subsidiary FSA.
Dexia, one of the world’s largest municipal lenders, said it was committed to taking all necessary measures to guarantee FSA’s AAA ratings and its position in public finance.
“(Dexia) will take the necessary steps… to confirm to clients and investors that we are in for the long haul, even if such steps are not necessary from a strict liquidity point of view,” Dexia said in a statement.
The line will have an initial term of five years and will be renewed as needed thereafter.
Dexia said it and FSA had demonstrated over the last quarters that they were able to provide credit and financing to the U.S. and international public sector at attractive returns.
“In a ravaged industry, this does not come by accident,” Dexia said.
Dexia has repeatedly stressed FSA was the only U.S. bond insurer that avoided risky asset-backed security collateralised debt obligations (ABS CDOs), in contrast with rivals.
Competitors MBIA Inc and Ambac Financial Group have had their triple-A ratings cut by S&P this month, while Moody’s has said it is likely to cut their ratings.
FSA still reported a net loss of $421.6 million in the first quarter after taking after-tax charges on credit default swaps and loss expenses on mortgage exposure. Dexia itself made a 5 billion euro ($7.77 billion) write-down in the first three months.
Dexia shares have dropped 36.5 percent since the start of April and plunged 14.6 percent last week alone, hitting its lowest level in five years. The DJ Stoxx European banking index is off 18.3 percent since the beginning of April and fell 5.4 percent last week.
Broker Dresdner Kleinwort wrote in a report on Friday it was concerned about the risk of losses at FSA and the possibility it might lose its AAA credit rating status. Dresdner cut its advice to “reduce” from “hold”.

Leave a Reply

Your email address will not be published. Required fields are marked *