Huge uncertainty surrounds the fate of Dexia Israel (Public Finance) Ltd. (TASE:DXIL) in light of the break up of parent company Franco-Belgian bank Dexia Group, which is exposed to €512 billion sovereign debt, mainly from Greece and other problematic countries.
Yesterday, it became clear that the bank will probably be split into three parts, one of which will be the French activities that will be merged with other nationalized French banks. A second arm will be the Belgian part of the bank that will be nationalized by the Belgian government, which will inject significant capital into it, while a third arm will be "the bad part of the bank" with all Dexia's "toxic assets."
Dexia announced last May that it planned selling Dexia Israel "as soon as possible even at a loss."
As things stand, it looks likely that Dexia Israel will be tagged onto the French arm of the bank, which will be called Dexia Credit Locale (DCL). This is because of pro-Palestinian activists in Belgium who have protested against Dexia Israel's operations including building "Jewish settlements in the West Bank" and that Dexia Israel is "party to war crimes."
Last week, Dexia Israel stressed that it is "a separate and independent Israeli bank that will continue to operate regularly in managing its focused businesses mainly in the Israeli local authorities sector."
Even so, rating agency Midroog Ltd. sees uncertainty surrounding DCL's support for Dexia Israel. DCL is committed to trim the credit given to Dexia Israel, which has exceeded a NIS 760 million loan that was extended. This sum represents 15% of the bank's credit.
Dexia Group holds a 65% stake in Dexia Israel (formerly Otzar Hashilton Hamakomi), which specializes in municipal credit, representing 88% of the credit disbursed by the bank.
In recent months, Dexia Israel has been in preliminary talks to be acquired by Mizrahi Tefahot Bank (TASE:MZTF), which did not progress, and Bank of Jerusalem (TASE: JBNK), which offered NIS 515 million - 75% cash and 25% in Bank of Jerusalem shares. Dexia Israel rejected the offer.
Published by Globes, Israel business news - www.globes-online.com - on October 10, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011