Bloomberg News

Qatari Royals to Buy Dexia BIL, Luxembourg’s Frieden Says

October 10, 2011

(Updates with comments from Frieden starting in second paragraph.)

Oct. 10 (Bloomberg) -- Luxembourg Finance Minister Luc Frieden said an investment group that includes members of Qatar’s royal family will take over Dexia SA’s unit in Luxembourg.

A group comprised of “members of the royal family of Qatar” is “willing to buy” Dexia Banque Internationale a Luxembourg SA “at short notice,” Frieden told reporters in Luxembourg today. The government intends to take a minority stake that will cost no more than 150 million euros ($204 million), he said.

Frieden spoke hours after the Belgian federal government agreed to buy Dexia’s local consumer-lending unit, ending a 15- year cross-border experiment with France. Belgium will pay 4 billion euros for the division and guarantee 60 percent of a so- called bad bank to be set up for Dexia’s troubled assets, Finance Minister Didier Reynders said.

The governments will guarantee as much as 90 billion euros of interbank and bond funding for 10 years for Dexia and its Dexia Credit Local unit. Responsibility will be distributed as it was in a 2008 Dexia rescue, meaning Belgium will provide 60.5 percent, France 36.5 percent and Luxembourg 3 percent. Frieden said this amounted to a guarantee of 2.7 billion euros.

“That’s a lot less than the guarantee we gave in 2008,” Frieden said. “At the time it was 4.5 billion” euros. “None of the guarantees we gave in 2008 ever had to be paid.”

KBC Sale

The dismantling of Dexia, once the world’s leading lender to municipalities, became inevitable after concern over European sovereign debt holdings caused its short-term funding to evaporate. Dexia’s bailout, three months after it passed European Union regulators’ stress tests, brings the region’s banking crisis from the continent’s periphery to its center.

Separately, KBC Groep NV, Belgium’s biggest bank and insurer by market value, agreed to sell its private banking unit to Luxembourg-based Precision Capital for 1.05 billion euros to bolster capital. The sale of KBL European Private Bankers SA, also based in Luxembourg, will increase KBC’s capital by about 700 million euros, the bank said.

Precision Capital represents the business interests of an unspecified Qatari investor, KBC said in a statement.

“That’s the reason I wasn’t able to divulge the name of the investor last week,” Frieden said today. “The other ministers yesterday were impressed and maybe even a bit jealous that we’d found a solution that avoids a huge taxpayer contribution and brings in a financially strong investor to secure the future of the company.”

“The fact that the family group from Qatar, which isn’t the Qatar Investment Authority as was erroneously reported last week,” bought KBL and agreed to buy Dexia BIL “is good for the Luxembourg financial sector because the two groups are complementary and can develop independently from one another,” he said.

--Editors: Patrick G. Henry, Eddie Buckle

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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