Belgium's Dexia Bank (DEXB) Down 22% on Sovereign Debt Holdings and Derivatives

Dexia Stock - DEXB.EU (StockCharts.com)
Belgium bank Dexia SA (DEXB.EU) closed at $1.01, down 22 percent, with 27 million shares exchanging hands. The stock traded as low as $0.81 today. Here is a quote and chart of Dexia's CDS (credit default swap) on Bloomberg.com. I'm not sure where charts are of its bonds online. The move was related to the european sovereign debt on their books. Read the articles below.

Dexia to Set Up ‘Bad Bank’ With Guarantees From France, Belgium (Bloomberg)
"Oct. 5 (Bloomberg) -- Dexia SA, Belgium’s biggest bank, plans to pool its troubled assets into a “bad bank” with Belgian and French government guarantees to protect depositors and its municipal-lending business."

Dexia, BNP Resist Greek Losses Three Times Worse Than Booked (Bloomberg)
"Dexia SA, BNP Paribas SA and Societe Generale SA are resisting pressure from regulators to accept more losses on their holdings of Greek government debt amid criticism they haven’t written down the bonds sufficiently."

Moody's reviews ratings of Dexia's main operating entities for downgrade (Moody's)
"Review affects A3 long-term ratings, D BFSRs and Prime-1 short-term ratings

Paris, October 03, 2011 -- Moody's Investors Service has today placed on review for downgrade the standalone bank financial strength ratings (BFSRs), the long-term deposit and senior debt ratings and the short-term ratings of Dexia Group's three main operating entities -- Dexia Bank Belgium (DBB), Dexia Credit Local (DCL) and Dexia Banque Internationale à Luxembourg (DBIL). The review for downgrade of Dexia's three main operating entities' BFSRs is driven by Moody's concerns about further deterioration in the liquidity position of the group in light of the worsening funding conditions in the wider market. The review of the long and short-term debt ratings is prompted by the downward pressure on the BFSRs.

The BFSRs of DBB, DCL and DBIL are currently aligned at D, mapping to Ba2 on Moody's long-term scale. The long-term debt and deposit ratings and the short-term debt ratings of these subsidiaries are also aligned at A3 and Prime-1, respectively. Subordinated and hybrid securities issued by these entities or their respective issuing vehicles were also placed on review for downgrade."

"In Moody's view, Dexia has experienced further tightening in its access to market funding -- even to short-term unsecured funding -- since the most recent rating action on 7 July. Moody's believes that in addition to these funding pressures, Dexia's collateral postings on hedging derivatives have increased due to substantial market volatility."

Dexia Breakup May Bring Takeover Prospects for Royal Bank, Aiken Says (Bloomberg)
"Dexia SA (DEXB)’s planned breakup raises the prospect of a takeover of some businesses by Royal Bank of Canada (RY), Barclays Capital analyst John Aiken said."

Belgium Cabinet to Meet as Dexia Weighs Options (WSJ)
"LUXEMBOURG—Belgian government ministers are meeting Tuesday evening to discuss the fate of Dexia SA, as the bank's executives scramble to put together a restructuring plan in the face of a market onslaught that has effectively turned the once high-flying global lender into a penny stock."

Dexia shares hit all-time low despite France and Belgium 'guarantee' (Telegraph)
"Shares in Dexia have hit an all-time low despite a joint statement of support for the troubled Franco-Belgian lender from the French and Belgian finance ministers."

Mismanagement gave death blow to Dexia (De Standaard.biz)
"BRUSSELS - Dexia Neck-risk interest rate swaps. In late September they sucked up 46 billion of collateral from the bank. And because the Dexia bankers 'forgot' to hedge.

From our editor

Dexia liquidity problems, was already known. But why did the bank just as half time saved by the authorities? According to insiders, the death knell of risky speculation on interest rate swaps - swap long-term contracts in various currencies - mainly that were completed during the period 2004-2008. They had the parent bank Dexia global hedge against interest rate risk on its long-term loans to cities and towns."

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