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Announcement:

Moody's to assign backed Aa1/P-1 ratings to certain Dexia guaranteed debt securities

13 Jan 2009

The outlook on the backed long-term rating is stable

Paris, January 13, 2009 -- Moody's Investors Service said today that it will assign backed long-term ratings of Aa1 and backed short-term ratings of Prime-1 to certain eligible debt securities to be issued under the guarantee agreement signed between the Governments of Belgium, France and Luxembourg and Dexia SA. The backed ratings of Aa1/Prime-1 reflect the fact that these obligations will be guaranteed on a several but not joint basis by the Kingdom of Belgium (Aa1/P-1), the Republic of France (Aaa/P-1) and the Grand Duchy of Luxembourg (Aaa/P-1) in the respective proportions of 60.5%, 36.5% and 3% per guaranteed obligation and up to a total aggregate commitment of EUR150 billion. The outlook on the backed long-term rating is stable, in line with the stable outlook on the ratings of the Kingdom of Belgium.

The guarantee scheme was implemented in the respective legal framework of each country in October 2008, with the related aid from each State being approved thereafter by the European Commission. Instruments covered by the guarantee are senior unsecured securities and financial instruments as well as interbank deposits raised by Dexia SA, Dexia Banque Internationale à Luxembourg, Dexia Bank Belgium and Dexia Crédit Local and their issuance vehicles, issued between 9 October 2008 and 31 October 2009 and maturing at the latest on 31 October 2011. Subordinated debts, hybrids and secured instruments are excluded from the scope of the guarantee.

Pursuant to the agreement, the total guaranteed obligations outstanding may not exceed a maximum of EUR150 billion, split in the following proportions for each government: Belgium EUR90.75 billion (60.5%), France EUR54.75 billion (36.5%) and Luxembourg EUR4.5 billion (3%).

Notwithstanding the risks a three-government supported operation might entail, Moody's notes that, according to the agreement, the governments are not liable for any error made by Dexia when assessing eligibility criteria, including the overall EUR150 billion cap on outstanding guaranteed debt. Hence, Moody's cautions that investors will remain somewhat exposed to Dexia's operational risk as they could unintentionally hold debts for which the guarantee is not valid.

The guaranteed liabilities outstanding will be published daily on the website of the National Bank of Belgium. In addition, internal procedures at Dexia are in place defining thresholds which will trigger specific alerts and actions inside Dexia, while an external auditor will validate the guaranteed outstanding amount on a monthly basis. These measures should mitigate to some extent the operational risk on Dexia related to these issues.

More importantly, Moody's acknowledges the clear intention of the governments of Belgium, France and Luxembourg evidenced by this guarantee agreement to improve the ability of Dexia to raise funding at a time when there is a lack of market confidence and scarcity of wholesale funding. Moody's notes that Dexia's liquidity position remains stretched and Moody's will continue to monitor it closely.

Moody's understands that, according to the terms of the guarantee, payments pursuant to any guarantee call will be subject to a delay in payment ranging between three days and ten days, depending on the call amount. Given the strong statement of support from the three national governments, Moody's expects any such claims to be paid in a timely manner should a credit event occur.

Moody's intends to assign a backed rating of Aa1, with stable outlook, to Dexia Crédit Local's guaranteed notes to be issued under its French EUR5 billion 'Bons à Moyen terme Négociable' (BMTN) programme and a backed Prime-1 rating to Dexia Crédit Local's guaranteed notes to be issued under its French EUR35 billion 'Certificats de Dépôt' (CD) programme. Given the maximum nominal amount per single debt issue of EUR1 billion and EUR2 billion, respectively, it is Moody's understanding that each guarantor will have between three and five days to pay any amount called under the guarantee applying to the issues under both programmes. Should Dexia or its subsidiaries issue new senior unsecured debt that is eligible for the guarantee and that matures within the guarantee period, Moody's may assign backed ratings to these instruments as well, on an issue-by-issue basis.

The last rating action on Dexia Group's main banking entities was on 1 October 2008, when Moody's downgraded the bank financial strength ratings (BFSRs) of Dexia Crédit Local, Dexia Bank Belgium and Dexia Banque Internationale à Luxembourg to C- from B+, to C- from B- and to C- from B-, respectively. In addition, the three entities' long-term debt and deposit ratings were downgraded to Aa3 from Aa1. All ratings, including BFSRs, long-term debt and deposit ratings and short-term ratings, were placed on review for possible downgrade.

The principal methodologies used in rating the issuers affected by this press release are "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies sub-directory. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Credit Policy & Methodologies directory.

Dexia SA, headquartered in Brussels, had total assets of EUR604.6 billion at year-end 2007. Dexia SA also recorded a net profit, group share, of EUR2.5 billion at year-end 2007. For the first nine months of 2008, the group reported a net loss, group share, of EUR723 million, down from a net income of EUR1.9 billion during the same period in 2007.

Paris
Helene Sere
Vice President - Senior Analyst
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Reynold R. Leegerstee
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's to assign backed Aa1/P-1 ratings to certain Dexia guaranteed debt securities
No Related Data.
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