Credit Suisse, Lone Star to Buy Fortis Bad Bank
Credit Suisse Group AG (CSGN) and Texas- based Lone Star Funds will pay 6.7 billion euros ($8.7 billion) for the assets of Royal Park Investments SA, a vehicle set up to manage toxic assets of failed Belgian bank Fortis.
Belgium, one of the vehicle’s shareholders, will get 1 billion euros in cash from the sale, reducing government debt by more than 0.2 percent of gross domestic product, Finance Minister Koen Geens said in an e-mailed statement from Brussels today. Ageas, the insurer formerly known as Fortis, will receive 1.04 billion euros, it said in a separate statement.
Royal Park Investments was set up in May 2009 by Fortis, the Belgian government and French bank BNP Paribas SA (BNP) as a special purpose vehicle to manage a pool of distressed debt securities. The shareholders contributed 1.7 billion euros in equity at the time. That amount had increased to a net asset value of 2.3 billion euros, Royal Park Investments said today.
Fortis, once Belgium’s biggest financial-services company, became a casualty of the 2008 financial turmoil after pouring 24.2 billion euros into purchasing the assets of ABN Amro Holding NV a year earlier, just as the U.S. subprime-mortgage market collapsed and lending dried up.
Most Fortis assets ended up in the hands of the Dutch and Belgian governments, while BNP Paribas agreed to buy the main banking unit in Belgium as well as a stake in its insurer. Fortis was given a call option on the BNP Paribas shares that the Belgian government received to win over investors for its state-organized break-up.
Ageas agreed to sell that option to Belgium for 144 million euros, according to today’s statements. The country is now free to sell its BNP stake, although it currently has no plans to do so, Geens said.
The accord comes as a shrinking economy curbed tax income in Belgium. Taxpayer funds had to be used to replenish lender Dexia SA’s capital following its dismantlement. The budget deficit widened to 3.9 percent of gross domestic product in 2012 from 3.7 percent a year earlier, the Brussels-based National Bank of Belgium said last month. Debt as a proportion of GDP rose to 99.6 percent last year from 97.8 percent in 2011.
Ageas (AGS), based in Brussels, will return 1 euro a share to shareholders after the transaction is complete, the Brussels- based company said in a separate statement today.
“This is another major step forward in simplifying our company and will eliminate the uncertainties linked to the evolution of the value of these assets,” Ageas Chief Executive Officer Bart De Smet said.
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