TEXT-Fitch: Catania, Italy faces manageable pressure from higher liabilities
Nov 23 - In relation to the recent administrative court outcome, calling on the Province of Catania to pay approximately EUR23m compensation, Fitch Ratings believes that Catania has sufficient resources to address the issue without jeopardizing its credit quality. This payment request stems from the damage from fraudulent behaviour of some employees in the early 1970s. This amount compares to the contingent liability which the Province had previously deemed to finalise with the transaction of a sum totaling EUR11m. At present, it is still unclear whether the province will pay this compensation either in a lump-sum or, alternatively, in tranches. Nevertheless, Fitch believes that Catania could still partly cover this liability with the fund balance surplus of about EUR15m and partly with recourse to debt, hinging upon a prudent debt management track record - a payback ratio of about eight years, below average life of debt, and debt service at 1.3x. Also, should the province decide to prioritise the refund payment (or the debt service) by subordinating payments to suppliers, it could exploit the robust cash reserves amounting to above EUR100m. However, the recourse to the fund balance surplus and/or borrowing could negatively affect the EUR50m investment plan for 2012-2014, as the province does not expect a substantial contribution either from the state or from the region of Sicily. Province of Catania full rating report is available at www.fitchratings.com. Additional information is available at www.fitchratings.com.