Dexia group has agreed on a package of restructuring measures, including the pursuit of negotiations with Caisse des Dépôts et Consignations and La Banque Postale in relation to French public sector financing and the backing of Dexia MA by CDC, the group announced this (Monday) morning.

The decision is one of four measures that form a restructuring plan of the group, with Dexia’s board of directors having approved: the sale of Dexia Bank Belgium to the Belgian government, accepted the terms of joint refinancing guarantees by the Belgian, French and Luxembourg governments of funding raised by Dexia SA and its subsidiary Dexia Crédit Local; and confirmed the pursuit of exclusive negotiations to sell Dexia Banque Internationale à Luxembourg to a group of international investors, with the participation of the state.

With respect to the future of Dexia Municipal Agency, the group’s main covered bond issuer, a statement issued by Dexia this morning said that the envisaged “backing operation” would enable Dexia MA to benefit from the support of CDC and would reduce Dexia’s short term funding requirement by almost Eu10bn.

This comes on top of a reduction of Dexia group’s short term funding requirement by more than Eu14bn as a result of the sale of Dexia Bank Belgium, according to the group.

The guarantees provided by the Belgian, French and Luxembourg governments will cover funding of up to Eu90bn over the next 10 years, with an extension of the term, if necessary, having been left open.

“As the states wish, the guarantee will be validated in the very near future and reassures depositors and creditors of the group that Dexia will have sufficient liquidity,” said the board of directors.

Standard & Poor’s on Friday said that it has left unchanged the ratings of covered bonds issued by Dexia entities following downgrades of the group’s cored banks a day earlier, but that it expects a possible restructuring of the group and would publish an update “once we have sufficient visibility of the outcome of the possible restructuring and its impact on the covered bond ratings”.

It said that any change in the ownership structure of any of the covered bond issuing entities could have a positive or negative impact on its view of the risk profile of the relevant covered bonds.

S&P rates AAA, on stable outlook, covered bonds issued by Dexia Municipal Agency, Dexia Kommunalbank Deutschland and Dexia LdG Banque. The rating agency on Thursday cut Dexia’s core banks from A, negative outlook, to A-, watch developing.

It said that as a result of these cuts, covered bonds issued by Dexia MA and Dexia Kommunalbank benefit from one unused notch of uplift above the issuer credit rating (ICR) of Dexia Crédit Local (DCL), and that a further potential one notch downgrade of DCL to BBB+ would therefore not result in an automatic downgrade of the covered bonds’ ratings, all else remaining equal.

“A further potential downgrade of the ICR on DCL to BBB (or below) would result in an automatic downgrade of the covered bonds issued by Dexia MA and Dexia Kommunalbank, however,” it said.

Any potential downgrade of Dexia Banque Internationale à Luxembourg’s issuer credit rating to BBB+ or below would automatically result in a downgrade of covered bonds issued by Dexia LdG Banque, according to S&P.