Belgium’s Long-Awaited Bank IPO Hits a Political Roadblock

(Bloomberg) -- The clock is ticking for Belfius Bank, the company that rose from the ashes of Franco-Belgian lender Dexia, if plans to conduct an initial public offering are to go ahead before local elections in October.

Belgium’s government, which owns 100 percent of Belfius, will need to green-light the IPO by early July or risk that the summer break and then election season get in the way of the plan, people familiar with the matter said. Further delays would leave no time to prepare prospectuses, analyst presentations and other information necessary for a successful share sale, they said, asking not to be named as they aren’t authorized to speak on the matter.

The future of the bank, which was created after the 2011 demise of Dexia, has become a bone of contention within the Belgian government, a four-way coalition in which the Christian Democratic Flemish CD&V party is holding up approval of the IPO with demands for compensation to Arco cooperative shareholders on losses tied to Dexia’s collapse.

Arco was the financial arm of the former Belgian Christian Workers Movement, whose successor continues to have close links with the CD&V. Deputy Prime Minister Kris Peeters, a member of the CD&V, has said the party will only give the go-ahead for the IPO if it gets guarantees of compensation for the cooperative’s investors. Ferry Comhair, a spokesman for Finance Minister Johan Van Overtveldt, a member of the New Flemish Alliance N-VA party, declined to comment.

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Alexander De Croo, also a deputy prime minister, said he “regrets” the CD&V’s linking of the Belfius plan with demands for Arco investors and warned that without an IPO for the bank, compensation might be problematic. “We have to look at things in the opposite direction: if there is no IPO for Belfius, there will be no solution in the Arco case,” he said in an interview with daily L’Echo.

As Dexia’s biggest private shareholder, Arco faced a financial loss of 1.5 billion euros ($1.7 billion) when the bank collapsed. Successive governments have promised solutions involving compensation and, despite a European Court of Justice ruling in 2016 that guarantees would infringe on European Union law, the current coalition has said Arco holders will be offered 600 million euros, covering about 40 percent of their investment if capitalized dividends are factored in, according to 2014 calculations from the finance ministry.

The most recent government proposal includes a 25 million-euro contribution from Belfius, 35 million euros from Beweging.net, as the Christian Workers Movement is now known, and the remainder coming from the state using IPO proceeds and an exceptional dividend of 400 million euros. The European Commission would need to rule on whether that plan constitutes state aid. An EU representative declined to comment on the case as it is ongoing.

As politicians at national level wrangle over the bank’s future, the clock is already ticking down toward election season, making a quick resolution and listing before the vote essential.

“We will be entering an electoral campaign that will last until October, but will be followed up in 2019 by the parliamentary elections,” De Croo told De Tijd. “I doubt we can bring Belfius to the stock market in such a climate, even if that is my wish.”

While Belfius Chief Executive Officer Marc Raisiere has already given up on an IPO before the summer, he remains optimistic on the plan despite the coming vote. “The communal elections do not prevent us from pushing the IPO button” in the fall, he said in an interview with L’Echo.

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