SFIL, the state-owned municipal lender born from the ashes of Dexia SA’s French business, plans to start issuing bonds in the second quarter, Chief Executive Officer Philippe Mills said.
SFIL, created last week by taking over Dexia Municipal Agency, or DMA, plans to issue between 3 billion euros ($4.06 billion) and 5 billion euros of covered bonds this year, Mills told journalists in Paris today. The company will tap bond markets through its fully owned unit Caisse Francaise de Finacement Local, a covered-bond issuer that took over DMA’s 94 billion-euro balance sheet.
Mills, who headed France’s sovereign-debt issuer Agence France Tresor, was picked by Finance Minister Pierre Moscovici to lead the new municipal bank, the country’s centerpiece in funding long-term municipal loans. French cities and local governments, which represent 71 percent of the nation’s public investments, face about 20 billion euros in long-term funding needs in 2013, according to a presentation handed to reporters.
Caisse des Depots et Consignations, the Paris-based state- owned bank, has a 20 percent stake in SFIL and is providing a 12.5 billion-euro liquidity support, according to the presentation. The French state owns 75 percent of SFIL, while La Banque Postale holds 5 percent.
SFIL’s covered-bond unit also has 9.4 billion euros of “sensitive” structured loans with 948 French local governments, out of a total of 20,000 clients, Mills said. While the bank is working at reducing risks from these assets, clients with “sensitive” borrowings are paying about 4 percent on average and “there is a very little minority with high or very high rates,” he said.
SFIL, which plans to have 416 employees in Paris and Lyon, mostly coming from Dexia, currently has a staff of about 200 people, Mills said. The municipal bank will provide refinancing resources for new municipal loans that will be sold by a joint venture between La Banque Postale and Caisse des Depots et Consignations, according to the presentation.
SFIL will also provide the Banque Postale-CDC joint venture, which is still to be created, with services including risk management, accounting and payments, according to the presentation.
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