(Repeat for additional subscribers)
July 11 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Assistance Publique - Hopitaux de Paris' (AP-HP) Long-term
foreign and local currency Issuer Default Ratings (IDR) at 'AA+' and its Short-term foreign
currency IDR at 'F1+'. The Outlook is Stable.
Its EUR2bn euro medium-term programme has been also affirmed at 'AA+' and 'F1+'.
KEY RATING DRIVERS
Fitch rates AP-HP on a top-down basis under its public-sector entity rating
criteria, due to its status as a public hospital establishment (PHE), tight
control by the French State (AA+/Stable/F1+) and its strategic importance to the
government. As a result, the ratings of AP-HP are equalised with those of and
credit-linked to France.
As a PHE, Fitch expects that AP-HP would benefit from very strong state support,
in case of need. Although the French government has no legal obligation to
prevent a default, Fitch assumes that it is highly motivated to provide support
and that it has the legal and financial resources to enable AP-HP to meet its
debt service obligations on time. By virtue of its status, AP-HP's assets and
liabilities cannot be liquidated or transferred to entities other than to the
AP-HP is subject to tight supervision by the State. The Council of Minister
appoints AP-HP's Director. Borrowings are subject to approval by the State if
AP-HP exceeds certain budgetary ratios. AP-HP was not subject to this approval
for 2013. Fitch believes that the strength of the State's financial supervision
helps prevent potential budgetary tension.
AP-HP performs essential public service through its provision of healthcare
services, medical teaching and research. AP-HP's revenues are highly dependent
on the State's decisions on tariff-setting and on general grants to finance
AP-HP's public health responsibilities.
AP-HP's aim is to balance its consolidation account (EUR1m) in 2015 and 2016 for
the main budget. The delivery of this aim is subject to realising efficiency
gains and asset disposals averaging EUR40m per year. Although AP-HP's net result
at end-2013 remained negative at EUR7.5m, it was an improvement on previous
years due to operating expenditure growing below the national trend, and a
rationalisation of its real estate portfolio (EUR50m of disposals in 2013).
AP-HP's long-term debt (EUR2.2bn) reached 31.3 % of operating revenue at
end-2013, close to its target of 30%. While its amortisation profile is less
than smooth, its debt profile does not represent a risk as repayment would be
sufficiently covered by current cash flow. Fitch estimates the net cash flow
would on average be EUR180m per year over 2015-2020. AP-HP has a qualified team
which prudently manages its debt given management's lack of appetite for risk.
Fitch considers AP-HP's liquidity arrangements as sufficient in meeting
debt-service requirements. Following the setting up of two rounds of
consultation for credit line renewals in 2014, Fitch considers that AP-HP is
less exposed to the risk of non-renewal, which would limit the costs associated
with these credit lines.
A rating action on the sovereign's rating would lead to a similar action on
AP-HP. A downgrade could result from a failure to balance its budget, a
significant weakening of budgetary and financial support from the State, or
adverse changes to its liquidity back-stop. A downgrade could also result from
an adverse change to AP-HP's status, which Fitch considers unlikely at present