DBRS Rates Dexia CAD Funding LLC’s CAD3.5 Billion Promissory Notes Programme at R-1 (high)

DBRS has assigned a rating of R-1 (high) to Dexia CAD Funding LLC’s (Dexia CAD Funding) CAD3.5 billion Promissory Notes Programme (the Programme), guaranteed by Dexia Crédit Local New York branch. The unsecured and unsubordinated notes issued under the Programme will be rated R-1 (high) with a Stable trend. On January 10, 2007, DBRS assigned AA (high)/R-1 (high) ratings with Stable trends to Dexia Crédit Local’s (DCL) outstanding debt and deposits.

This new commercial paper programme will be used for the group’s general funding needs. DBRS says that the rating of Dexia CAD Funding − a funding vehicle incorporated in the state of Delaware − reflects the unconditional guarantee provided by Dexia Crédit local, as well as the conservative liquidity management prevailing within Dexia’s North American operations.

DBRS notes that Dexia maintains substantial alternative liquidity in the form of high-quality securities, and that the management of the Programme by the New York treasury ensures a smooth repayment profile. Ultimately, Dexia CAD Funding’s rating takes advantage of the entity’s capacity to draw from the group’s strong liquidity, reflecting the highly integrated treasury management prevailing within Dexia.

“In our opinion, the group’s strong liquidity and superior credit strength, the prudent usage of the Promissory Notes Programme and the contingency plans allowing Dexia to maintain the liquidity of its North American operations at all times despite operating in a different time zone than its core European operations eliminates the need for explicit back-up liquidity lines from external local financial institutions in order to support the R-1 (high) rating,” comments Jean-Luc Lepreux, Senior Vice President for European banking and lead analyst for the Dexia group.

DBRS added that DCL’s ratings reflect its strong franchise as Europe’s largest territorial community lender, its low-risk and well-calibrated international diversification in public-sector lending, as well as healthy and stable financial fundamentals. The ratings are also based on the overall business and balance sheet strength of the entire Dexia group. The bank’s R-1 (high) rating is also supported by the group’s solid deposit base in Belgium and Luxembourg and its capacity to obtain cost-efficient long-term funding though covered bonds issuance. Finally, the ratings marginally incorporate DBRS’s expectation of some form of timely systemic support for the Dexia group in the extremely unlikely event of a stress scenario.

The following rating was assigned with a Stable trend:

Dexia CAD Funding LLC − Short-Term Instruments at R-1 (high)

Dexia Crédit Local is headquartered in Paris and had total assets of EUR276 billion at the end of June 2006. The Dexia group is headquartered in Paris and Brussels and had total assets of EUR547 billion at the end of September 2006.

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