Dexia to Provision for €395 million of Bonds in Defunct Hypo Alpe-Adria-Bank
Move follows Austria’s decision to impose losses on failed financial group’s bondholders
BRUSSELS—Dexia SA, the rump of a once-sprawling Franco-Belgian banking group, on Friday said it holds 395 million euros ($436 million) in bonds of defunct Austrian financial institution Hypo Alpe-Adria-Bank International AG and warned it would set aside money to cover possible losses on the bonds.
The decision comes after Austrian authorities earlier this week said they would impose losses on the failed bank’s bondholders, even those covered by guarantees from the regional Austrian government of Carinthia.
Dexia collapsed in 2011, as funding problems became too acute for the bank to endure. The Belgian government took over Dexia’s Belgian bank, renaming it Belfius. The French government helped take over the French parts of the bank. Other businesses were sold off.
Dexia SA is all that is left. It holds a portfolio of higher-risk assets accumulated from across the group’s former lending empire—assets like the Hypo bonds.
Dexia said its bonds benefit from the guarantee from Carinthia. But Austria’s finance minister said those guarantees wouldn’t be honored.
The decision effectively places some of the burden on the Belgian government’s finances, since it offered guarantees for debt issued by Dexia to prevent the group’s bondholders from taking a hit in Dexia’s collapse.
The Belgian finance minister Johan Van Overtveldt said he would discuss the situation with his Austrian counterpart on the sidelines of a meeting of eurozone finance ministers next week. The situation in Austria shows that Dexia and its government shareholders must “adopt an attitude of vigilance to protect and preserve in the best way possible the interests of Belgian taxpayers.”
Dexia said the amount it will set aside for losses on the bonds “will be determined in light of further developments of the situation.”
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