TEXT-S&P affirms Region of Ile-de-France ratings

(The following statement was released by the rating agency)

Overview
-- We have revised upward our estimate of the Region of Ile-de-France's
deficits after capital accounts until 2014.
-- We are revising down to 'aa+' from 'aaa' our assessment of
Ile-de-France's indicative credit level.
-- We are affirming our 'AA+/A-1+' long- and short-term ratings on
Ile-de-France.
-- The long-term rating now reflects the intrinsic creditworthiness of
the region and is no longer capped by the rating on the Republic of France.
-- The negative outlook continues to reflect that on the Republic of
France.

Rating Action
On Oct. 8, 2012, Standard & Poor's Ratings Services affirmed its 'AA+/A-1+'
long- and short-term issuer credit ratings on the French Region of
Ile-de-France. The outlook is negative.

At the same time, we affirmed our 'AA+' long-term issue rating on the region's
EUR4 billion euro medium-term note (EMTN) program and our 'A-1+' short-term
issue rating on its EUR1 billion French commercial paper (CP) program.

Rationale
The affirmation reflects our view of the "predictable and well-balanced"
institutional framework for French regions, Ile-de-France's "very positive"
financial management, and its wealthy, diversified, and resilient economy in
an international context, as our criteria define these terms. We also factor
into the ratings the region's "very positive" liquidity position and its very
low contingent liabilities.

The ratings are constrained by what we view as the region's limited revenue
flexibility and our estimates for higher deficits after capital accounts until
2014 compared with those under our 2011 base-case scenario. Given these
higher-than-expected deficits, the long-term rating now reflects the intrinsic
creditworthiness of the region rather than a sovereign rating cap.

We measure the region's intrinsic creditworthiness, by our assessment of its
indicative credit level, which we have revised down to 'aa+' from 'aaa'. The
ICL is not a rating but a means of assessing the intrinsic creditworthiness of
a local and regional government (LRG) under the assumption that there is no
sovereign rating cap. Since the 'aa+' ICL is at the same level as the
long-term rating on the Republic of France (unsolicited AA+/Negative/A-1+), we
no longer apply a sovereign rating cap on the long-term rating.

Standard & Poor's views Ile-de-France's financial management as very positive.
We believe the region has clear financial targets, realistic and detailed
financial planning, prudent and sophisticated debt and liquidity management,
and a strong ability to control operating expenditure. However, we believe
that Ile-de-France's ability to meet its debt targets has lessened slightly.

Under our current base-case scenario, we anticipate that Ile-de-France will
post deficits after capital accounts of around 8% of total revenues over
2012-2014, versus our base-case estimate in 2011 of deficits at less than 5%
of total revenues. We consider that the region's strong ability to rein in
operating expenditure will be slightly weaker than we previously expected. We
now anticipate a slightly larger increase in operating expenditure, by a
still-low 1.6% per year, compared with 1% annually in our 2011 base case.
Coupled with lower-than-expected growth of operating revenues due to the
increasingly unfavorable economic context, we now anticipate an operating
balance of 23% of operating revenues by 2014, which is high in an
international context. This is in line with our 2011 downside scenario but
markedly lower than the 27% we had anticipated under our base case. In
addition to the likely lower operating balance, we forecast slightly higher
capital expenditure of EUR1.63 billion, compared with EUR1.61 billion in our
2011
base case.

Though remaining moderate, we now consider that Ile-de-France's tax-supported
debt will exceed 60% of consolidated operating revenues by 2013, and reach 67%
of consolidated operating revenues in 2014.

If Ile-de-France's operating balance decreases to below 20% of operating
revenues by 2014, as we estimate under our downside scenario, we could revise
down the region's ICL and, ultimately, its long-term rating. Such a decrease
would likely weaken our view of its financial management and could translate
into larger deficits after capital accounts of more than 10% of total
revenues. We believe, however, that this scenario is unlikely at this stage.

Liquidity
We view Ile-de-France's liquidity position as very positive under our
criteria, thanks to the region's strong access to external liquidity and a
positive debt coverage ratio. In our view, the region's liquidity also
benefits from predictable and regular cash flows, especially state transfers
and tax proceeds.

We expect the region's debt service coverage to remain solid, with average
adjusted cash and liquid assets over the next 12 months, and its available
drawings on its revolving lines and possible liquidity lines to account for
more than 120% of its next 12 months' debt service.

Moreover, we consider that Ile-de-France has strong access to liquidity,
chiefly through its EUR4 billion EMTN program and its EUR1 billion French CP
program, and in the context of France's strong banking sector. Under its
Banking Industry Country Risk Assessment (BICRA) methodology, Standard &
Poor's ranks France in BICRA group '2'. BICRA scores range from '1' to '10',
with the lowest-risk banking systems in group '1' and the highest-risk in
group '10'.

We also believe that at any time the amount available under the committed bank
lines will cover 100% of Ile-de-France's CP outstanding.

Outlook
The negative outlook reflects that on the Republic of France. We cap the
outlook on French LRGs that are rated at the same level as the Republic of
France based on the outlook on the sovereign.

If we were to downgrade France, we would take the same action on the
Ile-de-France. Conversely, if we revise our outlook on France to stable, we
would also revise the outlook on Ile-de-France to stable.

Related Criteria And Research
-- Methodology For Rating International Local And Regional Governments,
Sept. 20, 2010
-- Methodology and Assumptions For Analyzing The Liquidity Of Non-U.S.
Local And Regional Governments And Related Entities And For Rating Their
Commercial Paper Programs, Oct. 15, 2009
-- Methodology: Rating A Regional Or Local Government Higher Than Its
Sovereign, Sept. 9, 2009
-- Institutional Framework Assessments For International Local And
Regional Governments, Dec. 19, 2011

Ratings List
Ratings Affirmed

Ile-de-France (Region of)
Issuer Credit Rating AA+/Negative/A-1+
Senior Unsecured AA+
Commercial Paper A-1+

(Caryn Trokie, New York Ratings Unit)