TEXT - Fitch affirms Caisse des Depots et Consignations
(The following statement was released by the rating agency) Dec 28 - Fitch Ratings has affirmed Caisse des Depots et Consignations (CDC)'s Long-term Issuer Default Rating (IDR) at 'AAA' and Short-term IDR at 'F1+'. The Outlook is Negative, mirroring that on the Republic of France's Issuer Default Rating. A full list of rating actions is at the end of this comment. RATING RATIONALE CDC's ratings are underpinned by the implicit solvency guarantee from the French state ('AAA'/Negative/'F1+'), stemming from CDC's status as a special public agency and extending to all CDC's obligations. They also reflect CDC's strategic importance as main manager of the regulated savings deposits collected by French banks, administrator of several public pension schemes and the custody of legal professions deposits. CDC's legal status of "special agency" (etablissement special), fully state controlled, is unique in France. However, Fitch considers that CDC enjoys the same implicit solvency and liquidity guarantee as other French public agencies (etablissements publics), under Law 80-539. Consequently, its IDRs are aligned and move in tandem with those of the French sovereign. CDC's ratings also take into account its close monitoring by the French state, notably through its supervisory board. Although CDC is not a bank and therefore not subject to capital adequacy ratios, although the Prudential Control Authority, France's bank regulator gives its opinion of CDC's capital adequacy. CDC is entrusted with the management of most of the regulated savings deposits (notably Livret A) collected by French banks, administrates several public pension schemes and the deposits of legal professions. In addition, among its mandates, CDC is the institutional lender to Agence Centrale des Organismes de Securite Sociale (commercial paper and Euro CP rating 'F1+'), the French Social Security Agency. CDC is also France's leading long-term institutional investor, supporting economic development, and performs several other public-interest missions on behalf of the state. CDC also operates competitive activities in sectors such as insurance - it has a 40% stake in CNP Assurances, France's largest life insurer- postal services - it has a 26.3% in La Poste ('AA'/Negative/'F1+') - economic support with 50% stake in the newly created Public Investment bank (BPI), as well as in leisure, services, real estate and private equity, and through a large portfolio of listed French companies. At 31 December 2011, CDC had a consolidated asset base of EUR262.3bn, of which EUR209.3bn was securities. CDC's results tend to be volatile, mainly due to its equity portfolio: Over 2008-2011, CDC's net results were fluctuating from a EUR1.3bn consolidated net loss in 2008, turned to a consolidated net surplus of EUR3.2bn in 2010 -after a consolidated net surplus of EUR2.5bn in 2009-and a reduced consolidated net income of EUR980m in 2011 mainly due to Dexia's impairments. Fitch expects CDC's performance to remain fragile in 2012 amid a deteriorated credit and stock market environment and some changes in accounting perimeters, notably CDC's holding since 2012 of a majority share in Veolia Transdev. CDC's liquidity is robust, thanks to (social accounts) reserves amounting to around EUR18.5bn and an outstanding of deposits of legal professions totalling around EUR36.7bn in Q312. Furthermore, CDC's liquidity needs are largely covered through a EUR30bn global commercial paper programme, and a EUR20bn CD programme. Moreover CDC Group's strong overall standalone liquidity at year-end 2011 was underpinned by the considerable EUR223bn funding collected on saving accounts (accounted in the Savings Funds section), and, lastly by its equity portfolio of EUR12.5bn. OUTLOOK NEGATIVE The Negative Outlook reflects the Outlook on France's sovereign ratings. Although highly unlikely, a change in CDC's legal framework and lower state support could trigger a downgrade. Any negative action on France's sovereign ratings would also be automatically reflected by CDC's ratings. KEY ASSUMPTIONS AND SENSITIVITIES CDC's ratings depend on those of France, which are based on some key assumptions regarding macroeconomic and budgetary performance. Fitch forecasts growth of 0.3% in 2013 and 1.1% in 2014 before the economy converges to an assumed medium-term trend rate of growth of 1.6% in 2016. This compares with the government forecast of 0.8% growth in 2013 rising to 2% from 2014. Fitch expects general government gross debt (GGGD) to GDP to peak at 94% in 2014 and gradually decline thereafter to 89% by 2017 while the government projects a peak of 91.3% in 2013 declining to 82.9% by 2017. France's rating also incorporates Fitch's assumption that the government will adhere to its commitments under the Stability and Growth Pact, Fiscal Compact and as set out in its Multiyear Public Financing Plan. The rating is potentially sensitive to policy actions that would materially increase public debt and/or contingent liabilities as a result of state intervention in the domestic economy and industry. A significant weakening of France's financial profile would likely undermine its ability and willingness to provide support to its dependent entities. Therefore, under Fitch's rating criteria on public sector entities outside the US, this could potentially justify a notching-down of CDC's ratings from those of France, up to three notches. The rating actions are as follows: - Long-term IDR: affirmed at 'AAA'; Outlook Negative - Short-term IDR: affirmed at 'F1+' - EUR18.5bn EMTN programme: affirmed at 'AAA/F1+' - EUR1bn BMTN programme: affirmed at 'AAA' - EUR20bn CD programme: affirmed at 'F1+' - EUR30bn global CP programme: affirmed at 'F1+' - Senior unsecured notes: affirmed at 'AAA' (Caryn Trokie, New York Ratings Unit)
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