Il caso Dexia... al di là dei rating, utile la possibilità di monitorare la vicenda degli interventi di salvataggio e delle decisioni della Commissione Europea...
Moody's downgrades various hybrid securities of Dexia
Paris, August 28, 2009 -- Moody's Investors Service today downgraded the hybrid instruments with optional deferral features issued by Dexia Group's main banking entities, Dexia Credit Local (DCL), Dexia Bank Belgium (DBB) and Dexia Banque Internationale à Luxembourg (DBIL), and their issuing vehicles. The ratings of the preferred stock securities (qualifying as Tier 1 capital) were downgraded to Caa1 with a stable outlook from B2 with a negative outlook. The rating of the 6.25% junior subordinated debt issued by DBB in November 1997 was downgraded to Ba2 with a negative outlook from Baa2 with a negative outlook. The ratings of the other junior subordinated debt instruments were affirmed at Baa2 with a negative outlook.
Meanwhile, the A1 long-term debt and deposit ratings, the A2 subordinated debt ratings and D+ bank financial strength ratings (BFSRs) of DCL, DBB and DBIL were unchanged, all with a negative outlook. The Prime-1 short-term ratings were also unchanged.
Today's rating actions on some of Dexia's cumulative and non-cumulative hybrid instruments reflect Moody's assessment of an increased probability of coupon suspension on these securities with optional deferral features. Dexia and the European Commission (EC) are engaged in ongoing discussions on Dexia's state aid package and restructuring plan. In Moody's opinion, there is a risk that Dexia may be advised or may decide to include these instruments as loss-absorbing capital.
The rating actions are part of Moody's review of certain hybrids issued by European banks and insurers for which the EC's approval is pending. Please refer to Moody's announcement "Moody's sees broader impact on hybrid ratings triggered by EC's state aid reviews", published on 19 August 2009.
PENDING THE EUROPEAN COMMISION'S APPROVAL OF DEXIA'S RESTRUCTURING PLAN
Moody's understands that Dexia is still discussing its restructuring plan with the EC following the state aid received from the governments of Belgium, France and Luxembourg, including:
• a total capital injection of EUR6 billion, representing nearly 4% of Dexia's risk-weighted assets at year-end 2008;
• a guarantee from the governments capped at a maximum of EUR150 billion on short-to-medium term debt raised before the end of October 2009;
• a guarantee by the Belgian and French governments on a US$12 billion financial products portfolio, in excess of a US$4.5 billion first-loss covered by Dexia Group, to facilitate the sale of FSA's financial guaranty business, completed in July 2009.
While the guarantee relating to the Financial Products portfolio was approved by the EC in March 2009, Moody's notes that the EC's enquiry into the restructuring plan is still underway, including discussions between the interested parties as noted in the publication on State Aid in the Official Journal of the European Union, dated 4 August 2009. Moody's also understands that the conclusions of these restructuring discussions are expected by October 2009.
DOWNGRADE OF NON-CUMULATIVE TIER 1 WITH OPTIONAL DEFERRAL FEATURES
The downgrade to Caa1 (stable outlook) from B2 (negative outlook) of the non-cumulative Tier I instruments issued by DCL, DBIL and Dexia Funding Luxembourg (DFL, guaranteed by Dexia Group) reflects, in Moody's opinion, a high likelihood that these instruments may suffer coupon deferral going forward. Indeed, it is Moody's opinion that the ongoing discussions with the EC into Dexia's restructuring plan might result in the group being refrained from paying coupons on these instruments, as was recently the case for KBC, in line with the EC's stated objective of burden sharing. The ratings also take into account the non-cumulative features of these perpetual instruments, implying a higher expected loss than for cumulative instruments since they are not subject to payment at a later date.
Moody's continues to view the weak mandatory solvency triggers attached to the Tier I issues as unlikely to be breached in the medium term due to the rating agency's expectations that Dexia Group, DCL and DBIL's capital positions will remain adequate in the medium term. However, Moody's believes that the optional non-payment of interest by the issuer attached to these perpetual instruments increases the risk of a coupon deferral and for a longer period than previously estimated.
Additionally, in the case of the Tier 1 issued by DFL and DCL, an optional regulatory intervention clause enables regulators to suspend coupon-payment at their discretion as well as to impose a principal write-down. Although the rating agency continues to consider that the risk of principal write-down is lower in the medium term than a coupon deferral, the ratings also incorporate some risk of principal loss. The stable outlook reflects Moody's conservative expected loss assumptions in terms of the likelihood and time horizon of missed coupons, as well as the low sensitivity of these instruments to Dexia's intrinsic financial strength.
DOWNGRADE OF THE RATINGS OF THE CUMULATIVE UPPER TIER 2 INSTRUMENTS WITH OPTIONAL DEFERRAL FEATURES; AFFIRMATION OF THE RATINGS OF THE OTHER UPPER TIER 2 ISSUES
Moody's downgraded the ratings of the 6.25% junior subordinated debt issued by DBB in November 1997 (ISIN BE0116241358) to Ba2 (negative outlook) from Baa2 (negative outlook), reflecting its assessment of a high probability of coupons omissions being linked to an optional deferral provision tied to dividend payment by DBB to its parent. The cumulative nature of coupon payments limits the loss severity of a coupon deferral for this particular issuance and explains the rating differential when compared with the Tier 1 non-cumulative instruments mentioned above, despite similar assumptions in terms of potentially missed coupons. The negative outlook incorporates the uncertainty linked to the optional deferral provision of this particular instrument. It is also in line with the negative outlook on the senior debt of DBB, due to the sensitivity of this instrument's rating to DBB's BFSR.
Simultaneously, Moody's affirmed the ratings of the other junior subordinated issues of DBIL and issuing vehicle Dexia Overseas Limited (guaranteed by DBB) at Baa2 with a negative outlook. The rating agency views the risk of deferred payment on these securities as more limited given the weak financial triggers and understands that there are no optional coupon deferral features attached to these issues. Moreover, the cumulative nature of the interest on such instruments limits the expected loss for investors. However, Moody's will closely monitor the situation in the coming months to see whether an intervention from the authorities could include these instruments as loss-absorbing capital, which is reflected in the negative outlook on these instruments.
RATINGS AFFECTED
The following hybrids were downgraded to Caa1 (stable outlook) from B2 (negative outlook):
- Dexia Funding Luxembourg SA's preferred stock EUR500 million 4.892% (ISIN: XS0273230572)
- DCL's preferred stock EUR700 million 4.3% (ISIN: FR0010251421)
- DBIL's preferred stock EUR225 million 6.825% (ISIN: XS0132253468)
The following hybrid instrument was downgraded to Ba2 with a negative outlook from Baa2 with a negative outlook:
- DBB's junior subordinated debt 6.25% EUR230 million (ISIN: BE0116241358)
The following hybrid instruments were affirmed at Baa2 with a negative outlook:
- DBIL's junior subordinated debt 5% EUR153 million (ISIN XS0350684907)
- Dexia Overseas Limited's junior subordinated debt Flt USD50 million (ISIN XS0116242784)
- Dexia Overseas Limited's junior subordinated debt Flt USD100 million (ISIN XS0117920149)
- Dexia Overseas Limited's junior subordinated debt Flt JPY10 000 million (ISIN XS0123134206)
- Dexia Overseas Limited's junior subordinated debt Flt JPY5 000 million (ISIN XS0123018557)
The last rating action on Dexia Group's main operating entities was implemented on 2 April 2009, when Moody's downgraded the ratings of preferred stock and junior subordinated debt issued by DCL, DBB and DBIL and the group's issuing vehicles to, respectively, B2 from Baa1 and Baa2 from A3, with a negative outlook. The long-term debt and deposit ratings and BFSRs of DCL, DBB and DBIL were unchanged at, respectively, A1 and D+ (the latter mapping to a Ba1 BCA), with a negative outlook. The Prime-1 short-term ratings were also unchanged.
The principal methodologies used in rating the issuers covered by this press release are "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", which can be found at
www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies sub-directory. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Credit Policy & Methodologies directory.
Dexia SA, headquartered in Brussels, had unaudited total assets of EUR651 billion at year-end 2008. It recorded a negative net profit, group share, of EUR3.3 billion for the full year of 2008 (down from a positive EUR2.5 billion in 2007), and a net profit group share of EUR534 million in 1H2009 (down from a net profit of EUR821 million in 1H2008).
