NEW YORK - Standard & Poor's Ratings Services said today that it lowered to A-plus/A-1 from AA-minus/A-1-plus its long- and short-term counterparty credit ratings on the core entities of Belgium-based banking group Dexia S.A.: Dexia Crédit Local (DCL), Dexia Bank S.A. (DB), Dexia Banque Internationale à Luxembourg (DBIL), and Italy-based Dexia Crediop SpA.
At the same time, Standard & Poor's placed the ratings on these entities on CreditWatch, with developing implications for DCL, DB, and DBIL, and negative implications for Dexia Crediop. Standard & Poor's also lowered the ratings on hybrid capital instruments and junior subordinated debt to BBB from A and placed these ratings on CreditWatch with negative implications.
The AAA senior secured ratings on all issued covered bonds remain unchanged.
"The downgrade reflects the negative impact that current turbulent market conditions are having on Dexia's financial profile, mainly in terms of revenues and access to funding," said Standard & Poor's credit analyst Taos Fudji. "In our view, Dexia's recent difficulties have also weakened the group's business franchise."
The CreditWatch placements of DCL, DB, and DBIL, with developing implications, integrate uncertainty regarding the repercussions of expected additional support measures on the business and financial profiles of Dexia group and individual group members.
The CreditWatch placement of Dexia Crediop, with negative implications, reflects the potential weakening of group support, given uncertainties about the French and Belgian governments' future decisions and their potential implications on Dexia's Italian operations.
The A-plus rating on Dexia Crediop factors in a one-notch uplift above the bank's stand-alone credit quality.
