Belgian government, BNP reach new deal to save Fortis

7th March 2009, Comments 0 comments

The Belgium government and BNP Paribas have clinched a new deal to carve up struggling financial group Fortis, the prime minister's office said Saturday.

BRUSSELS - The Belgian government and the French banking group had given themselves until midnight on Friday to revise the deal after minority shareholders in the stricken Fortis Holding company rejected an earlier agreement.

Under the new deal, BNP would still buy 75 percent of Fortis Bank, the Belgian banking business of the group, from the Belgian state, which would retain a 25 percent interest.

"This transaction will assure Fortis Bank's essential role serving the Belgian economy by partnering it with the BNP Paribas group, which will make a strategic operation in reinforcing its pan-European network," the prime minister's office said in a statement.

However, the French bank would buy 25 percent of Fortis' Belgian insurance operations from the holding company instead of only 10 percent as foreseen under the earlier agreement.

Fortis Holding would also be stuck with less exposure to toxic assets while the state offered guarantees against further losses at Fortis Bank and BNP made commitments to keep jobs.

If Fortis Bank continues to have difficulties, BNP secured a guarantee from the Belgian government to cover up to 1.5 billion euros in losses and infuse the Belgian bank with up to two billion euros.

"For us, this agreement is profitable to savers, shareholders, workers and the state," the Belga news agency quoted Prime Minister Herman Van Rompuy as saying.

While the deal clears much of the uncertainty hanging over the fate of Fortis' Belgian businesses, the new deal still has to be accepted by the holding company's shareholders.

The Belgian-Dutch financial services group was broken up last October as the global financial crisis undermined investor confidence. The Dutch state took over its Dutch assets and Belgium the Belgian banking assets.

The dismantling of Fortis stripped the publicly traded holding company of its main assets, prompting shareholders to launch court action as their shares became next to worthless.

In December, a Brussels appeal court backed their legal challenge, ruling that the minority shareholders should have been consulted first, and appointing a panel to review the operation.

Last month, Fortis shareholders rejected by a slim majority the sale to BNP Paribas as well as the nationalisation of its assets in the Netherlands

AFP / Expatica

0 Comments To This Article