TEXT - Fitch says Peugot write-down among many expected for EU corporates

Fri Feb 8, 2013 10:15am EST

(The following statement was released by the rating agency)

Feb 8 - Peugeot's non-cash accounting write-down is likely to be just one of many announced by European corporates over the next couple of years, Fitch Ratings says. Our analysis suggests over half of issuers may be valuing their net assets too aggressively and asset impairments may accelerate in the weak economic environment. This is likely to be exacerbated by high prices paid to acquire assets in the boom years. These non-cash write-downs are generally headline-grabbing numbers, but often have a very limited impact on companies' credit profiles and are largely already factored into our ratings. However, they can sometimes have an impact, especially when they are a surprise to market participants or cause an adverse reaction in debt markets. We will publish a special report in the next few days on our expectations for a rise in corporate impairments and write-downs. This will include an analysis of the sectors that are most likely to be affected and the potential for aggressive accounting techniques when assessing impairments. Peugeot's EUR3.9bn write-down was required by regulators. We do not expect it to damage the company's credit profile, although it will keep the spotlight on the car-maker's broader problems. The company's ability to retain strong liquidity, return to underlying profitability in its core business and meet its target for positive free cash flow by the end of 2014 are likely to be the main drivers of its rating. (Caryn Trokie, New York Ratings Unit)

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