Dexia will not pay coupon on Tier 2 notes

Belgian-French financial services group Dexia said on Monday it would not pay an optional coupon on its Dexia Bank Belgium notes while it awaits a European Commission ruling on state aid.

Dexia also said it waived the call option related to these upper Tier 2 perpetual notes, which would therefore not be redeemed on Nov. 18, 2009.

On Oct. 30, the European Commission, the EU's executive arm,authorised an extension of the guarantee granted to Dexia by the French, Belgian and Luxembourg States until the end of February 2010, or until a final decision on the group's restructuring plan.

This authorisation was subject to prior commitments, such as not paying out any discretionary coupons, and not exercising any call options on any Upper Tier 2 perpetual instruments issued by any entity of the group, Dexia said.

Dexia, one of the world's largest municipal lenders,received a 6.4 billion euro ($9.6 billion) bailout by France,Belgium, Luxembourg and key shareholders in September 2008 and later won state guarantees for its new borrowing.