FRENCH president Francois Hollande was forced to nationalise France’s second biggest specialist mortgage lender on Saturday night after a cash drought left it unable to pay its debts, meaning the government could be on the hook for up to €20bn in guarantees.
Credit Immobilier de France (CIF), which has around four per cent of the French mortgage market, was handed a state guarantee by French finance minister Pierre Moscovici, in part to help it pay a €1.75bn (£1.39bn) covered bond debt, which is due to mature next month.
As part of the bailout, which is subject to European Commission approval, CIF’s chief executive Claude Sadoun has been forced to step down and will be replaced by government appointee Bernard Sevez.
Moscovici said: “To allow the CIF group to respect its overall commitments, the state decided to respond favourably to its request to grant it a guarantee.”
The rescue deal also guarantees the lender’s assets up to a ceiling of more than €20bn, a source said, adding that the terms agreed prevent the CIF from making new loans.
“Without a buyer, the bank lacks the solid base which would allow it to access liquidity”, the source said.
That suggests that the lender is likely to be wound down and that months-long efforts to find a buyer for it would be abandoned.
The firm had originally put itself up for sale in June, but failed to find a buyer, prompting the government to move in. The move is the latest rescue of a financial institution by French authorities, following a bailout of Dexia between 2008 and 2011.
CIF, which provides loans to people with low incomes, is the second biggest specialist mortgage player in France behind Credit Foncier de France and has a large exposure to the French real estate market – which was hit by a 10 per cent contraction in transaction volumes last year.
Its once healthier balance sheet has also been crippled by the evaporation of cheap credit and increasingly onerous banking regulations in the form of Basel III requirements.