CORRECTION: Dexia : Press release 14/11/2012 9:49 pm

Regulated information* - Brussels, Paris, 14 November 2012 - 9:30 pm

Decisions relating to the capital increase and to the orderly resolution plan

The board of directors of Dexia SA met on 14 November 2012 and approved the revised plan for the orderly resolution of the Dexia Group which will be notified for approval to the European Commission by the Belgian, French and Luxembourg States very shortly. The European Commission's decision is expected by the end of 2012.

This revised plan, confirms the strategy followed by the Group since October 2011 and intends to avoid the materialisation of the systemic risk that the bankruptcy of the Group would represent to the Belgian, French and European financial systems:

• it contains an undertaking to dispose of various operating entities of the Group. This process is well advanced and Dexia has disposed of almost all of its commercial franchises;
• it reaffirms the support provided by the Belgian, French and Luxembourg States to the Dexia Group enabling it to complete the Group's orderly resolution. This support is expressed by the States granting a tripartite guarantee of up to a maximum EUR 85 billion of principal, as well as an undertaking by the Belgian and French States to subscribe to an EUR 5.5 billion capital increase for Dexia SA in the form of preference shares. The financial consequences of this capital increase for the current shareholders are described below;
• with the sale of Dexia Municipal Agency (DMA) to a new credit institution, in which France would be the majority shareholder, it permits the creation of a new scheme for French local public sector financing. As indicated in the Interim Declaration dated 8 November 2012, Dexia will not grant a guarantee to DMA on the portfolio of structured credits. The credits initially covered by that guarantee, and the current outstanding of which amounts to EUR 9.4 billion, will remain on the DMA balance sheet.

Dexia provided information on the progress of discussions between the European Commission and the States in the Interim Declaration relating to its results for Q3 2012^[1]. In that Declaration, the Group specified the principal changes to have occurred in relation to the plan notified to the Commission in March 2012. In particular, the new assumptions on funding rely on anticipated "normalised" market conditions over the Group's resolution period. These new assumptions appear to be more costly than anticipated in March 2012, which lead Dexia SA, in its interim financial statements as at 30 September 2012, to book a full write off of its holding in Dexia Crédit Local, reflected by negative net assets.

In accordance with its legal obligations, the board of directors of Dexia SA therefore decided today to convene an Extraordinary Shareholders' Meeting of the company to be held on 21 December 2012 in order to enable shareholders to rule in particular on the continuation of the company's activities. For the reasons stated in the special report, drawn up in accordance with Article 633 of the Companies Code, which it approved today and which will be provided to shareholders at the same time as the convocation, the board of directors of Dexia SA recommends that shareholders rule in favour of a continuation of the activities of Dexia SA and approve the capital increase to which the Belgian and French States undertook to subscribe on 8 November last, up respectively to 53% and 47%, subject to all required legal and regulatory authorisations and to the approval of the European Commission.

The capital increase reserved for the Belgian and French States will be realised via the issue of 28 947 368 421 preference shares^[2], the States having required the issue of new preference shares in exchange for their support. Insofar as the capital increase would be effected as part of recovery measures decided by the General Shareholders' Meeting of a company in difficulty within the meaning of Article 633 of the Belgian Company Code, the States will not be obliged to make a mandatory public tender offer if they hold more than 30% of the shares with voting right securities of Dexia SA at the close of the transaction.

The preferential rights implement the principle already stated by Dexia SA by which any future improvement of the company's financial situation will primarily and principally benefit the guarantor States, having regard to the risks they run.

They respond to the requirement of burden sharing stated by the European Commission in the rules governing State aid. Indeed, in consideration of the rules relating to State aids, the European Commission will approve the definitive orderly resolution plan of the Dexia group only under the condition that existing shareholders do not benefit from the States intervention.

The new preference shares will have the benefit of the same voting rights as existing ordinary shares. Preferential rights attached to these shares will give a priority to the States of up to 8% per annum of the share subscription amount on any dividend distribution by Dexia SA. The total possible shortfall of dividends compared to the rate of 8% per annum will constitute a liquidation supplement returning as a priority to the holders of preference shares. The latter will also benefit in the event of the liquidation of Dexia SA from the priority attribution of liquidation distributions. Moreover, any future operation to reduce the capital of Dexia SA with a view to wiping off losses or to creating reserves will be attributed as a priority to ordinary shares and share repurchases by the company will be aimed as a priority at the holders of preference shares.

These preferential rights of course crystallise a value close to zero and prospects of a return to value increase practically nil for existing ordinary shares. Nevertheless, the board of directors of Dexia SA considers that this value reflects the actual situation of the Dexia Group and does not result from the conditions of the capital increase which do no more than enshrine an existing situation, since shareholders' equity is effectively negative and since it is taken for granted that any future improvement in Dexia's financial situation will benefit the States in the first place.

The characteristics described above constitute a simplified summary of the rights associated with the preference shares, which will be described in detail in the convocation to the Extraordinary Shareholders' Meeting.

The subscription price for the new shares is EUR 0.19. It corresponds to the average closing price of the Dexia SA share on the NYSE Euronext Brussels during the 30 calendar days prior to the today board's decision to propose to the Extraordinary Shareholders' Meeting that it proceeds with the capital increase.

As this price is lower than the accounting par of Dexia SA shares and as the board is proposing to remove the preferential rights of existing shareholders, the issue of the new preference shares is also the subject of a special report drawn up in accordance with Articles 582, 596 and 598 of the Companies Code approved today by the board of directors. This report relates in particular to the subscription price and to the financial consequences of the transaction for existing shareholders. This report^[3] will also be made available to shareholders, along with the convocation.

In addition to strengthening the equity of Dexia SA, the proceeds of the capital increase will enable the company to settle its liabilities vis-à-vis Dexia Crédit Local^[4] and its subsidiaries, to proceed with a capital increase for its subsidiary Dexia Crédit Local in an amount of EUR 2 billion and, subject to the absence of any clear deterioration of its credit risks and under normal market conditions, to continue its orderly resolution of the Group. 

* Dexia is a listed company. This press release contains information subject to the transparency regulations for listed companies.