Financial/political crisis in Belgium

The highest court in Belgium ruled Thursday, December 18, that the country's prime minister had exerted improper pressure on the judiciary in connection with the planned state-led break-up of the Fortis financial group.

Fortis is a Benelux fianncial powerhouse that came into being in 1990 when a large Dutch insurer (AMEV), and a Dutch retail banking group (VSB) both merged with a Belgian insurance company, AG.

It has made many strategic acquisitions since, and entered investment banking in 1996 with the purchase of MeesPierson NV.

That, and the rest of an acquisition binge lasting into 2007, left Fortis with a balance sheet heavy with debt. Then in June of this year the honchos at Fortis noticed that an international credit crunch was underway, and decided that their balance sheet needed some cleansing. They issued 200 million new shares of stock at a price of 10 euros each, and they cancelled this year's dividend, saving 1.5 billion euros.

The share price headed south -- because the new shares diluted the value of the old, and/or because the dividend cancellation diminished the whole.

By late September, a run-on-the-bank was underway. On Friday, September 26, 20 billion euros were withdrawn from Fortis accounts.

The company was partially nationalized by the three Benelux countries acting in concert the following Monday. Since they don't want to stay in the banking business. these governments appear desirous of selling Fortis to a French firm, BNP Paribas.

The courts of Belgium in particular have thrown a monkeywrench into the works, holding that the private investors have to have a say on the future of their company -- so the government(s) have to comply with normal procedures in terms of holding a shareholders' meeting before concluding the sale.

Those are the judicial proceedings with which the country's executive branch allegedly interfered, leading to a scandal and round of resignations last week.

Meanwhile, I understand that BNP Paribas is bow saying that time is/was of the essence of its deal to buy Fortis. Since this is all taking too much time, BNP may be pulling out, rendering the issue of a shareholder meeting rather moot.

So turns the world. Use it or lose it.