Moody's rates Dexia's guaranteed debt securities
Global rating agency Moody's today assigned provisional long-term ratings of (P)Aa3 and short-term ratings of Prime-1 to the eligible debt securities to be issued by Dexia Credit Local (DCL; deposits Baa2 negative/Prime-2; bank financial strength rating E/standalone credit assessment, ca stable) under the Independent On-Demand Guarantee signed by the governments of Belgium, France and Luxembourg on 24 January 2013. The European Commission (EC) approved the guarantee on 28 December 2012.
Consequently, Moody's assigns a provisional rating of (P)Aa3, with a negative outlook, to the guaranteed notes to be issued by DCL's French EUR25 billion ' Bons à Moyen terme Négociable' (BMTN) programme and a Prime-1 rating to the guaranteed notes to be issued by DCL's French EUR65 billion 'Certificats de Dépôt' (CD) programme. The provisional long-term ratings of (P)Aa3 and short-term ratings of Prime-1 that Moody's assigns to the securities and financial instruments to be issued by DCL under this definitive guarantee scheme reflect the lowest rated guarantor's rating (i.e., the Kingdom of Belgium) and its large commitment relative to the other governments. This reflects the fact that the debt securities issued by DCL are guaranteed on a several but not joint basis by Belgium, France and Luxembourg.
The execution of the tripartite guarantee agreement follows the EC's approval on 28 December 2012 of Dexia group's orderly resolution plan. It replaces the temporary guarantee scheme entered into on 16 December 2011 that was used to support DCL's liquidity in 2012 pending the EC's approval.
The guarantee is provided on a several but not joint basis by the governments of Belgium (51.41%), France (45.59%) and Luxembourg (3%). The total guaranteed obligations outstanding may not exceed a maximum of EUR85 billion. This ceiling includes the outstanding funding already raised under the EUR55 billion temporary guarantee of December 2011 (as amended), which outstanding issuances remains guaranteed in accordance with the following proportions for each government: 60.5% for Belgium, 36.5% for France and 3% for Luxembourg.
Instruments covered by the guarantee will have a maturity of less than or equal to 10 years, and will be issued between 24 January 2013 and 31 December 2021 either in the form of: (1) securities or financial instruments issued by DCL, including commercial paper, certificates of deposits, negotiable debt instruments, bonds and medium term notes; or (2) contracts entered into by DCL, including interbank deposits in selected foreign currencies (i.e. USD, CAD, GBP, JPY or CHF), non interbank deposits in euro or selected foreign currencies (i.e. USD, CAD, GBP, JPY or CHF) and deposits from central banks. Moody's will only assign ratings to guaranteed instruments in the form of securities or financial instruments. Subordinated debt, equity and hybrid equity securities and financial instruments, secured instruments, derivative instruments and interbank loans, deposits, advances and overdrafts in euro are excluded from the scope of guarantee.