Unfortunate news for Belgian-French bank Dexia today as monoline FSA draws down on a $5bn credit line.
Such is the power of Ackman.
But there’s monoline pain elsewhere in francophone Europe. Take Credit Agricole. This chart from US research outfit CreditSights. It’s a breakdown of CA’s monoline exposure:
When former monoline ACA went to junk, notes CreditSights, CA wrote down its exposure 100%.
So with CIFG, FGIC and SCA all poised to go exactly the same way as ACA, as per the above pie chart, a €1.6bn hit could be heading Credit Agricole’s way. CreditSights again:
We think that monoline charges of this order of magnitude, if they prove necessary, could push Credit Agricole SA (CASA - the quotes entity) either very close to break-even or possibly to a net loss for 2Q08.
Given that Bloomberg puts consensus analyst estimates at €1.336bn, there writedowns could be quite jolting.
CIFG, FGIC and SCA will, of course, have a broad impact on all the financials in the event that they fail; which might not be so distant a prospect. All three are drifting close to their statutory surplus requirements. CreditSights analysts expect the measures to be breached “within the second quarter”.
Currently, CIFG is only $15m off, FGIC only $300m off and XLCA only $100m off the statutory surplus levels.
If those levels are breached, then the NYSID may have to step in. “May” because, of course, as blogged about previously, if they do step in, they’ll accelerate all those billions and billions of CDS contracts.
Nevermind waiting around for MBIA and Ambac then, expect CIFG to roil the credit markets sooner.
Oh and CIFG too, is, a French concern, owned as it is by Banque Populaire and Caisse d’Epargne.
Merde.
