Annual report 2006 - Dexia.com

PORTFOLIO Number Loan Collateral Excess (+)
AS OF DECEMBER 31, 2006 of contracts amount or Lack (-)
(in millions of EUR, unless otherwise stated)
of collateral
RAPPORT DE GESTION
CONSOLIDATED
FINANCIAL STATEMENTS
COMPTES SOCIAUX
TOTAL OUTSTANDING PORTFOLIO 133,976 843.3 882.5 +39.1
- Contracts with sufficient collateral 60,407 295.6 441.5 +145.9
of which:
- Contracts with redemption or guaranteed capital 52,713 239.3 381.4 +142.1
- Contracts without redemption or guaranteed capital 7,694 56.2 60.1 +3.9
of which:
- Accepted an agreement (1)
(and signed a waiver) 4,822 34.1 36.3 +2.2
- Not accepted an agreement 2,872 22.1 23.8 +1.7
- Contracts with insufficient collateral 73,569 547.8 441.0 -106.8
of which:
- Contracts with redemption or guaranteed capital 5,532 39.6 36.4 -3.2
- Contracts without redemption or guaranteed capital 68,037 508.1 404.6 -103.6
of which:
- Accepted an agreement (1)
(and signed a waiver) 41,697 305.8 243.6 -62.2
- Not accepted an agreement 26,340 202.3 160.9 -41.4
(1) Either the Dexia Offer, the Duisenberg arrangement or another kind of settlement.
6.2. LERNOUT & HAUSPIE
Dexia is concerned in various ways with the bankruptcy of Lernout
& Hauspie Speech Products (LHSP) and the consequences
thereof. Initially, plaintiffs acted in all US proceedings both
against Dexia SA and Dexia Bank Belgium. Meanwhile, in all
US proceedings a notice of dismissal without prejudice has
been filed as far as Dexia SA is concerned. Consequently, the
pending proceedings now only involve Dexia Bank Belgium. In
the course of 2006 no new proceedings have been initiated,
either against Dexia Bank Belgium (Dexia Bank) or Dexia SA.
6.2.1. Claim on Lernout & Hauspie Speech Products
Dexia Bank has a claim chargeable to the bankruptcy of LHSP
for a principal sum of some EUR 30 million for which an
impairment has been recorded for some EUR 25 million.
The liquidation of LHSP’s assets is subject to separate proceedings
in Belgium and in the United States.
Dexia Bank was claiming a pledge on the business assets of
LHSP. In a ruling dated April 10, 2006, the Court of Appeal
in Ghent refused to acknowledge this pledge. Dexia Bank
renounced to lodge an appeal with the Supreme Court. This
means that Dexia Bank is now, as an unsecured creditor, unlikely
to receive any dividend from the Belgian liquidation of
LHSP.
6.2.2. Claim on Lernout & Hauspie Investment
Company
As of December 31, 2006, Dexia Bank has a claim on Lernout
& Hauspie Investment Company (LHIC) for an amount
of some EUR 62 million for which an impairment has been
recorded for some EUR 57 million.
As part of the security for its claim, Dexia Bank has a pledge
on a portfolio of securities owned by LHIC.
6.2.3. Indictment of Dexia Bank in Belgium in the
criminal investigation against the LHSP directors
On June 24, 2003, Dexia Bank announced that it had been
indicted in the criminal investigation relating to LHSP. The
indictment of Dexia Bank concerns offences allegedly committed
between July 2, 1999 and September 1, 2000 by Artesia
Banking Corporation.
The investigation is now officially closed and the prosecutor
has sent a «draft writ of summons» to the parties that are
likely to be prosecuted, including Dexia Bank. According to
the draft, Dexia Bank will be prosecuted for various offences,
among which forgery in the annual financial statements
of LHSP (valsheid in de jaarrekening/faux dans les comptes
annuels) and market manipulation (koersmanipulatie/manipulation
de cours). The draft, which is subject to changes,
alleges in substance that Artesia Banking Corporation has
aided and abetted LHSP in the creation of fictitious revenue,
by granting a USD 20 million loan to Messrs. Lernout, Hauspie
and Willaert, whilst Artesia BC allegedly knew that the
management of LHSP would utilize these funds for improper
revenue recognition.
Dexia Bank considers having serious grounds for contesting
these charges.
Several parties have introduced a claim for damages in the
criminal proceedings. The largest civil party is Deminor, representing
– according to its website – 11,000 shareholders
of LHSP, with an aggregate amount of alleged damages of
approximately USD 200 million in principal. There are about
400 other individuals that have reported themselves as civil
parties. It is likely that not all of the potential applicants have
already introduced their claim; those who have done so, have
in most cases not yet stated and or provided evidence of the
alleged losses.
It should be added that in January 2003, Dexia Bank has itself
lodged a complaint with the examining magistrate against
persons unknown, claiming compensation.
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Dexia / Annual Report 2006