Today, BNP Paribas PA (BNP) announced that yesterday its Board of Directors has decided to convene shareholders to vote on a proposal to issue €5.1 billion of non-voting preference shares to the French government. The issuance of preferred shares will strengthen BNP Paribas' Tier 1 ratio by €2.55 billion, equivalent to 50 basis points, which would take its Tier 1 ratio up to around 8% pro-forma. The announcement was part of BNP's early estimate of 2008 financial results which, although including a period of "exceptionally violent movements in the capital markets," the company expects to post a full year net profit of €3 billion. The Board of Directors will meet on February 18, 2009 to determine the shareholder meeting date.
The issuance of preferred shares to the French government is part of the second tranche of funding under the government's bank recapitalization plan approved by the European Commission this past December. With the issuance of the preferred shares, BNP would simultaneously repay the €2.55 billion of subordinated debt issued to the French government in December 2008 as part of the government's overall €360 billion plan announced in mid-October.
Separately, the Belgian government-brokered plan for BNP to acquire certain assets of Belgium-based Fortis Financial Group continues to remain in limbo following the decision by the Court of Appeals of Brussels in mid-December delaying the sale until Fortis shareholders can vote on the deal and BNP's subsequent decision to cancel its extraordinary general meeting of shareholders to vote on the deal. In addition, various sources have reported that several lawsuits have been filed or will be filed by Fortis shareholders in both Belgium and the Netherlands seeking to annul the sale or obtain compensation from the respective governments based on the acquisition of Fortis Group at conditions which were not at arm's length or which were below the real value of the assets.