RPT-Fitch Affirms UFG's CP Programme at 'F1'

Fri Jul 11, 2014 7:32am EDT

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July 11 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Union Finances Grains' (UFG) commercial paper (CP) programme rating at 'F1'. A list of rating actions is at the end of this comment.

KEY RATING DRIVERS

UFG's French CP programme's Short-term rating reflects Fitch's view that the four banks guaranteeing the CPs would be extremely likely to honour their commitment to guarantee the CPs issued under the programme, if required. The four banks are Credit Agricole Corporate and Investment Bank (A/Stable/F1), Le Credit Lyonnais (A/Stable /F1), Credit Cooperatif (A/Stable/F1) and Banque Europeenne du Credit Mutuel. Banque Europeenne du Credit Mutuel benefits from a counter-guarantee from Banque Federative du Credit Mutuel (A+/Stable/F1). The following banks guarantee the repayment of individual tranches of UFG's CPs, subject to limits on the total volume of CPs:

EUR84m for Credit Agricole Corporate and Investment Bank;

EUR141m for Le Credit Lyonnais;

EUR83m for Credit Cooperatif; and

EUR160m for Banque Europeenne du Credit Mutuel The banks' guarantees are not joint, and each bank is only exposed to the CPs it guarantees.

Fitch considers that the bank guarantees are extremely likely to be honoured, given the huge reputational damage the banks would face if they failed to repay the CPs and the small amounts guaranteed in absolute terms. These guarantees are renewed on an annual basis, but are grandfathered (i.e. guaranteed CPs benefit from the guarantee until they mature).

RATING SENSITIVITIES

The Short-term ratings assigned to the CPs individually would move in tandem with the Short-term Issuer Default Ratings of the banks guaranteeing the related CPs.

Fitch does not assign a rating to UFG as an entity, as it is purely an issuing vehicle. UFG is a union of agricultural cooperatives (with variable capital) authorised by the French Ministry of Agriculture. Currently, 32 French cereal cooperatives are members of the union. UFG's sole purpose is to provide its members with alternative forms of financing; UFG finances part of the cooperatives' cereal inventories by issuing CPs. UFG has no funding needs for itself and its overheads are paid by the member cooperatives. UFG has equity of EUR1.4m, which bears no relation to the amounts issued on the financial markets. The rating actions are as follows:

UFG's Commercial paper guaranteed by Credit Agricole Corporate and Investment Bank: affirmed at 'F1'

UFG's Commercial paper guaranteed by Le Credit Lyonnais: affirmed at 'F1'

UFG's Commercial paper guaranteed by Credit Cooperatif: affirmed at 'F1'

UFG's Commercial paper guaranteed by Banque Europeeenne du Credit Mutuel:

affirmed at 'F1'