Dexia backs FSA's financial products business with $5 billion line of credit

By Julie A. Miller

Washington, June 23 - Dexia SA will provide a $5 billion committed, unsecured standby line of credit to the financial products division of bond insurer Financial Security Assurance Inc., which the European bank bought in 2000.

Dexia's move is designed to ally doubts that FSA, which issues guaranteed investment contracts for municipal issuers and others requiring triple-A rated deposits, has sufficient liquidity to meet its obligations. The line will have an initial term of five years and will be renewed as needed after that, Dexia said.

"Under a wide range of stress scenarios, this business has ample liquidity to meet its obligations, but within a context of highly nervous financial markets, we want to remove any doubt that we will have the resources to hold investment assets to maturity," Robert P. Cochran, chairman and chief executive officer of FSA Holdings and FSA, said in a statement.

"On a stand-alone basis, FSA is strong and has acquired a leadership position in public, project and infrastructure finance," added Axel Miller, CEO of Dexia, noting that it has maintained top ratings from the rating agencies.

Financial Security Assurance Holdings Ltd., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial products to clients in the public and private sectors around the world.

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