(Repeat for additional subscribers)
March 5 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Instituto de Finanzas de
Cantabria's (ICAF) Long-term foreign and local currency Issuer Default Ratings
(IDRs) at 'BBB' and its Short-term foreign currency rating at 'F2'. Fitch has
also affirmed ICAF's outstanding bonds at 'BBB'. The Outlook has been revised to
Stable from Negative.
KEY RATING DRIVERS
ICAF's ratings are based on its clear link to the Autonomous Community of
Cantabria (BBB/Stable/F2), and on the explicit financial support from the
regional government stated in its charter. The institute's objectives are to
contribute the region's sustainable economic and social development and carry
out the financial management and supervision of Cantabria's stake holding in
several public sector entities' (PSEs). The Outlook revision reflects its
In December 2011 the Autonomous Community of Cantabria decided to explicitly
guarantee the fulfilment of any obligations and liabilities that ICAF has with
any third party and the regional government will provide the relevant economic
resources to do so. Fitch also understands that in the extreme event that ICAF
would have to be liquidated, such an outcome would not occur before all its
liabilities had been fulfilled.
ICAF meets all the criteria under the agency's methodology to be classified as a
dependent entity of the region. Since November 2011, the national regulator has
classified ICAF as an entity that belongs to the regional government's
administrative sector. The consequence for the Autonomous Community of Cantabria
is that the deficits incurred by ICAF as well as its debt will now be included
in its fiscal targets, therefore the regional administration may become even
more vigilant to any deviations from ICAF's initial budget.
ICAF had financial debt at end 2013 of EUR133.5m with moderate debt repayment in
the medium term. The credit exposure including the debt guaranteed by ICAF is
relatively moderate at EUR157m and essentially on the public sector constituting
about 65% of total risk including loans and debt guarantees. In the past three
years, ICAF made significant reserves on potential impaired loans that totalled
EUR24.7m at end 2013 or about 19% of its assets. In particular, ICAF had to
assume liabilities of the soccer club Racing Santander for a total of EUR11.8m.
In 2014 ICAF expects to receive financial compensation from the regional
government through a capital injection, with the aim to bring the capital ratio
at 12% in 2014 (equity / loans net of impairment charges) while it was negative
A change in ICAF's legal status, which is rather unlikely, or a downgrade of
Cantabria's ratings would automatically be reflected in a change in ICAF's
Conversely, an upgrade of Cantabria will be necessary for an upgrade of ICAF.
Fitch assumes there will be no change in ICAF's legal status or to the explicit
guarantee from the Autonomous Community of Cantabria.