Dexia closes $817 million sale of loss-making FSA unit

PARIS (Reuters) - Belgian-French financial group Dexia (DEXI.BR) (DEXI.PA) said on Wednesday it has finalized the sale of its loss-making U.S. insurance unit Financial Security Assurance (FSA) to bond insurer Assured Guaranty (AGO.N) for $817 million.

Under the terms of the deal, Dexia sold FSA for $546 million in cash and 21.85 million Assured Guaranty shares, which traded at $12.66 per share as of 2010 GMT. This stake represents 13.9 percent of Assured Guaranty's capital, Dexia said.

Under the terms of the deal, Dexia will retain FSA's financial products unit, which has a $16.6 billion portfolio and current loss of $20 million.

In an interview with French newspaper La Tribune due for publication on Thursday, Chief Executive Pierre Mariani said Dexia did not need to book new provisions to cover itself against credit default in the financial products portfolio.

"Two billion euros ($2.81 billion) of provisions have already been booked in 2008 and at this level we estimate that we are correctly covered against the credit risk on this (financial products) portfolio," Mariani said.

Should the unit's losses exceed $4.5 billion, Belgium and France would guarantee them in exchange for new Dexia shares that Dexia investors authorized last month.

But Mariani said Dexia was far from this threshold.

"There is not one stress scenario where we get near the level at which the state would intervene," he said.

Mariani also said that total losses linked to FSA as a whole amounted to 3.2 billion euros in 2008.

Dexia, the world's largest municipal lender, received a 6.4 billion euro bailout by France, Belgium, Luxembourg and key shareholders last year and later won state guarantees for its new borrowing.

(Reporting by Marie Maitre; Editing by Steve Orlofsky)