(The following statement was released by the rating agency)
PARIS, March 21 (Fitch) Fitch Ratings has affirmed Puy-de-Dome's
foreign and local currency Issuer Default Ratings (IDRs) at
'AA'. The Short-term
foreign currency IDR has been affirmed at 'F1+'. The Outlook is
Stable. A full
list of rating actions is provided at the end of this
KEY RATING DRIVERS
Puy-de-Dome's ratings reflect its sound operating performance,
levels, and a robust socio-economic profile. They also factor in
expectations of continuing deterioration in the department's
performance and debt metrics.
According to preliminary results the department's operating and
in 2013 remained comfortable at 13.6% and 12.3% respectively.
expects the current margin to weaken in the medium term, to
about 6.1% in 2017,
despite the introduction of national compensation resources for
2014. This is based on the assumption of further cuts in state
2015 which, combined with growing social spending, could
deterioration in the department's financial profile.
Puy-de-Dome's budget shows limited flexibility, as 74% of
operating revenue is
based on non-modifiable taxes and state transfers, and operating
driven by rigid items such as staff costs, mandatory transfers
spending. Although the department demonstrates a tight control
over costs and
discretionary spending, Fitch considers the remaining leeway on
be insufficient to fully offset the expected decline in
resources. However, the
department's remaining tax flexibility on property tax is a
factor, though there is a commitment to not change tax rates
over the medium
Direct debt is expected to have reached EUR328.5m or 54.4% of
current revenue at
end-2013, a moderate level compared to peers. The debt payback
confortable at 4.4 years. Debt structure is sound and does not
Declining current margins should lead to a weaker capacity to
capital expenditure. The self-financing rate, after debt
decrease to less than 50% (from slightly below 60% on average in
despite lower capital expenditure following cuts to budgetary
should push debt higher to 64% of current revenue by 2017,
resulting in a debt
payback ratio of about 10.5 years.
Liquidity is underpinned by the strong predictability of cash
flows and by ready
access to short-term funding. The latter is based on regular
issuance of billets
de tresorerie (BT) under a EUR100m programme, backed up by
bank credit lines. Liquidity forecasts are detailed and updated
on a regular
Fitch considers that the department's track record of reliable
forecasting and operational modernisation will help contribute
to its ability to
implement its medium-term financial strategy.
Despite a high level of contingent liabilities, Fitch considers
risk as low due
to solid borrower profiles (fire services, social housing
institutions) and a
sound overall debt structure. A sophisticated monitoring
framework and strict
eligibility guidelines implemented by management are a positive
A deterioration of operating performance leading to an operating
consistently below 10% or a debt payback ratio consistently of
10 years or above
could justify a negative rating action.
Sustained improvement of operating performance leading to a debt
consistently below 3 years could lead to an upgrade.
The rating actions are as follows:
Long-term foreign and local currency IDRs: affirmed at 'AA';
Short-term foreign currency rating: affirmed at F1+
EUR500m EMTN programme: affirmed at 'AA'/'F1+'
EUR100m BT programme: affirmed at 'F1+'
+33 1 44 29 91 89
Fitch France S.A.S.
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+33 1 44 29 91 45
+7 495 956 9901
Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22,
firstname.lastname@example.org; Peter Fitzpatrick, London, Tel:
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1103, Email: email@example.com.
Additional information is available on www.fitchratings.com
Applicable criteria, "Tax-Supported Rating Criteria", dated 14
"International Local and Regional Governments Rating Criteria
States", dated 17 August 2012 on www.fitchratings.com.
Applicable Criteria and Related Research:
International Local and Regional Governments Rating Criteria
Tax-Supported Rating Criteria
Institutional Framework for French Subnationals
Interpreting the Financial Ratios in International Public
Finance Reports -
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