Posted on 01/20/2009 4:27:31 PM PST by DeaconBenjamin
A French state-controlled agency is looking to US investors for the first time to help raise several billion dollars of bail-out funding for the country’s banks.
Société de Financement de l’Economie Française (SFEF) – the French agency created to raise funding in the bond markets using a government guarantee for its banks – said selling dollar-denominated bonds would help diversify its investor base.
It is the first time France has sold government guaranteed bonds in dollars and highlights moves by European banks and agencies to diversify funding sources, ahead of a tidal wave of issuance that could weigh on the market.
Morgan Stanley estimates that €500bn of new bonds could be sold this year using European government guarantees. Already €133.5bn of such bonds have been sold since October, according to data provider Dealogic, when the UK and other European countries presented their plans to help finance their banks.
European banks have €1,150bn ($1,477bn) of debt due to be repaid between the fourth quarter of 2008 and the end of 2011, according to Standard & Poor’s.
SFEF alone plans to sell up to €70bn in bonds this year. The agency has sold up to €18bn so far in euro-denominated bonds. It could this week sell about $3bn of new dollar bonds. Demand is expected to come from US investors as well as central banks and other investors in dollar-denominated debt across the world.
SFEF bond fundraising plans are part of a French government initiative to provide up to €265bn in new loans to France’s banks to ease lending conditions. SFEF, which was created in October 2008, will use an explicit state guarantee to raise debt of up to five years maturity on the markets and pass it on to banks at a commercial rate plus a 20-basis-point fee for the government backing.
Thierry Coste, chief executive of SFEF, said the dollar transaction would “provide an opportunity for SFEF to diversify its institutional investor base and will position SFEF as a global AAA issuer”.
The bond issue is being arranged by BNP Paribas, Deutsche Bank, HSBC and JPMorgan, and could be priced as early as this week, according to one banker.
SFEF would be only the third European entity to issue such bonds in dollars after similar moves by the Royal Bank of Scotland and Sweden’s Swedbank.
Barclays was the first bank in Europe to use government guarantees to help raise funding in the bond markets, in October. It was swiftly followed by other UK banks and then by European issuers such as SFEF, and banks in countries including Germany and Portugal.
Germany’s IKB, one of the biggest European casualties of the financial crisis, this week sold €2bn in government-backed bonds. The bank was taken over by US buy-out fund Lone Star last summer after being stricken by its subprime investments.
We’re gonna bail out the Frogs.
Non, merci.
Some things never change, France will always be there when they need us.
Not the first time we’ve had to bail out France.
If France is going to issue dollar-denominated bonds... then they’ll have to have enough dollars to cover it. Which means they’ll have to ‘buy’ those dollars from the US, increasing the international demand for dollars - thus driving up the value of the dollar.
And that’s perfectly fine to me!
:-)
Merde.
Is that a reference to what is being purchased, or what it is being purchased with?
Wasn’t there some article just last week about how the French were weathering this better than everybody else?
http://www.freerepublic.com/focus/f-news/2165794/posts
Hmmm.
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