Fitch Revises Cassa del Trentino's Outlook to Stable; Affirms 'A'

Fri Jul 18, 2014 12:59pm EDT

(The following statement was released by the rating agency) MILAN/LONDON, July 18 (Fitch) Fitch Ratings has revised Cassa del Trentino SpA's (CdT) Outlook to Stable from Negative and affirmed its Long-term Foreign and Local currency Issuer Default Ratings (IDRs) at 'A' and Short-term foreign currency IDR at 'F1'. Fitch has also affirmed CdT's bonds and notes at Long-term 'A'. KEY RATING DRIVERS The Outlook change reflects a recent similar rating action on the Province of Trento (A/Stable/F1; see "Fitch Revises Trento's Outlook to Stable, Affirms A" dated 18 July 2014), which fully owns and exerts strategic and operational control over CdT. The latter is the financial arm/treasurer of the province and distributes provincial resources to finance municipalities and other not-for-profit entities on Trento's territory. CdT's ratings reflect the Province of Trento's continued strong financial support and full control, which Fitch does not expect to change over the medium term. CdT's ratings are aligned with those of its sponsor by virtue of the guarantee provided by the province on CdT's debt transactions under provincial law 13/1973 art. 8bis. The guarantee also extends to CdT's future issuance. Fitch uses a top-down approach to rate CdT as part of its "Ratings of Public Sector Entities - Outside the United States" criteria. Following CdT's incorporation of Tecnofin Trentina in 2013, an equity participation vehicle which previously held a stake in CdT, the Province of Trento became CdT's sole shareholder, with neutral effect on both governance and profitability. On the other hand, as Tecnofin Trentina's assets were almost totally equity-funded, CdT's capitalisation was strengthened, growing to EUR111m in 2013 from EUR42m ad end-2012. Fitch expects CdT's debt to increase to EUR1.5bn by 2016 from EUR1.3bn at end-2013 as it continues to support capital spending of provincial cities and companies. A third of its debt is amortising and the remainder is of bullet maturity. CdT has set aside cash provisions yearly (EUR317m at end-2013) for the latter, in accordance with internal policy. All bonds and loans are fixed-rate with the exception of EUR325m bonds maturing in 2014 and 2015. To refinance the bonds expiring in 2014-2015, CdT tapped into its EUR800m EMTN programme for EUR215m (leaving residual availability of about EUR120m, or 15% of the programme). CdT traditionally maintains adequate liquidity with cash accounting, on average, for about a third of financial debt. Also, if need be, CdT has access to credit lines from the province's treasury bank (law 4/1975 art. 5) and the province can advance subsidies (Law 7/1979 art. 9 bis). Fitch expects CdT's net interest margin to remain stable at EUR16m over the medium term, as lower interest rates offset increased activity, and also partly reflecting its not-for-profit mission. The higher level of personnel expenditure (from the merger with Tecnofin Trentina) is expected to be fully offset by higher dividend inflows of around EUR5m in 2014-2016. RATING SENSITIVITIES A change in the sponsor's ratings would be reflected on those of CdT. A downgrade for CdT could also result from a change in its statute and/or in the legislative framework that weakens its link with the province. Contact: Primary Analyst Sergio Ciaramella Director +39 02 87 90 87 216 Fitch Italia SpA Via Morigi 6 - Ingresso Via Privata Maria Teresa, 8 20123 Milan Secondary Analyst Raffaele Carnevale Senior Director +39 02 87 90 87 203 Committee Chairperson Guilhem Costes Senior Director +34 93 323 8410 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Tax Supported Rating Criteria' dated 14 Aug 2012; 'Ratings of Public Sector Entities -Outside the United States' dated 04 March 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Tax-Supported Rating Criteria here Rating of Public-Sector Entities - Outside the United States here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.