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Dexia says will take 59 million euro charge for Detroit debt

Two vacant and boarded up apartment buildings sit across from a liquor store near downtown Detroit, Michigan July 21, 2013. REUTERS/ Rebecca
Two vacant and boarded up apartment buildings sit across from a liquor store near downtown Detroit, Michigan July 21, 2013. REUTERS/ Rebecca

BRUSSELS (Reuters) - Nationalized Franco-Belgian bank Dexia said on Monday it would take a 59 million euro (US$77.84 million) charge in its second-quarter income related to debt holdings from the U.S. city of Detroit.

The Michigan city filed for bankruptcy protection last week in the largest-ever such U.S. case. If approved by a federal judge, it would force Detroit's thousands of creditors into negotiations with the city's emergency manager to resolve an estimated $18.5 billion in debt.

The bank said its exposure to Detroit's debt under restructuring was $305 million. Of that amount, $75 million is insured outright with the remainder covered by an insurer currently undergoing restructuring.

"The group's exposure has been provisioned over time by Dexia such that it will take an additional adjustment of 59 million euros in its accounts," the company said in a statement.

The bank has been reduced to a rump of legacy assets but its fate remains important because France, Belgium and to a lesser extent, Luxembourg are guaranteeing its borrowings and are threatened with losses that weigh on their budget deficits.

(Reporting by Ethan Bilby; Editing by Tim Dobbyn)

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