Troubled bank Dexia gets €45bn financing lifeline

05 Dec 2011 | 10:50
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Franco-Belgian bank Dexia has secured temporary financing guarantees of €45bn from Belgium, France and Luxembourg, according to reports.

Dexia said a draft temporary guarantee agreement was submitted to its board of directors and the European Commission today, Reuters reports.

The lifeline will cover Dexia's funding needs until May next year.

Dexia shares gained 7.37% by mid-morning on the news, climbing to €0.379 per share.

According to KBC Securities, the agreement gave Dexia temporary relief, although it is still asking the ECB for a considerable amount of funds and the guarantee fee is a potential negative.

Dexia received a €90bn rescue package from Belgium, France and Luxembourg in Octoberto cover its borrowings. It had been agreed Belgium would take over its operations for €4bn.

But the guarantees have been slow to take effect, sparking shareholder concern the countries were wrangling over how to share the burden. Fresh talks last month damaged Belgian government bonds and the euro.

Dexia is set to provide the three states with collateral for some of the guaranteed obligations issued, a fee of €225m and monthly fees based on the outstanding amount of guaranteed debt.

Dexia said the agreement is a draft and the terms might be reviewed. Its board said it will reach a decision once such terms are finalised. The bank also confirmed the longer-term guarantee agreed in October is irrevocable.

Categories: Economics / Markets

Topics: Dexia bank

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