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Fitch Affirms Metropolitan Community of Saint-Quentin-en-Yvelines at 'A+', Outlook Stable
December 19, 2013 / 4:45 PM / in 4 years

Fitch Affirms Metropolitan Community of Saint-Quentin-en-Yvelines at 'A+', Outlook Stable

PARIS, December 19 (Fitch) Fitch Ratings has affirmed Metropolitan Community of Saint-Quentin-en-Yvelines's (CASQY) Long-term foreign and local currency Issuer Default Ratings (IDR) at 'A+', and Short-term foreign currency IDR at 'F1'. The Outlook is Stable. KEY RATING DRIVERS CASQY's ratings take into account its high debt levels, estimated at 207% of current revenue at end-2013, which are largely legacy debt incurred under its former 'new town' status. They also reflect strong operating performance, an outstanding socio-economic profile and skilled financial management. The Stable Outlook reflects Fitch's view that future performance will be consistent with the current ratings. Fitch expects debt to stabilise over the medium term to 211% of current revenue in 2016, after a temporary increase in 2014 due to the delivery of a velodrome built under a public-private partnership (PPP). We believe debt reduction is likely to remain one of CASQY's key policies in the long term. We forecast a weaker debt payback ratio, rising to 12 years in 2016 from an expected 8.6 years in 2013 due to a lower current balance. Debt servicing is fully covered by the operating balance due to the long maturity of debt. CASQY's operating margin is comfortable and is expected by Fitch to have stabilised in 2013 at 29.5% of operating revenue. We forecast a decline in the operating margin to 25% in 2016, mainly due to flat revenue growth. Forthcoming cuts in state transfers should be offset by higher tax proceeds, spurred by the local economy and property market. We expect expenditure growth will be driven by staff costs, PPP rent and contribution to the intermunicipal equalisation fund. In line with CASQY's debt reduction strategy, we forecast a decline in capital expenditure, which should average EUR38m each year until 2016, from EUR63m per year since 2008. This should help limit the fall in capital expenditure self-financing rate, which is expected by Fitch to decrease to 38% in 2016 from 60% in 2013. CASQY's ability to control its capital outlays should be enhanced by the recent move to multi-annual management of capital spending. Saint-Quentin-en-Yvelines is one of the main business centres in the region Ile-de-France (AA+/Stable/F1+). Its economy is well diversified and benefits from a young, highly skilled workforce. CASQY's high level of public infrastructure and transport links to Paris and the Paris-Saclay academic cluster are key features of its competitiveness. Operational integration with member municipalities is adequate and financial management methods are prudent. CASQY's sound governance is characterised by clear policy guidelines, among which are debt reduction and balanced economic growth. Guaranteed debt was high at 246% of current revenue at end-2012, but is mostly dedicated to well-regulated social housing institutions. Local housing demand is strong, which limits the risks taken on by CASQY with regard to urban development operations. RATING SENSITIVITIES A large deterioration in operating performance and the capital expenditure self-financing rate, leading to weaker-than-projected debt ratios, notably a debt payback ratio consistently above 12 years, could lead to a downgrade. A high capital expenditure self-financing rate and strong debt reduction resulting in a debt payback ratio below nine years on a sustained basis and debt stock below 170% of current revenue, could lead to an upgrade. Contact: Primary Analyst David Lopes Associate Director +33 1 44 29 91 45 Fitch France S.A.S. 60, rue de Monceau 75008 Paris Secondary Analyst Olivier Jacques Associate Director +33 1 44 29 91 89 Committee Chairperson Vladimir Redkin Director +7 495 956 7064 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; 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 August 2012, "International Local and Regional Governments Rating Criteria", dated 9 April 2013 on www.fitchratings.com. Applicable Criteria andALL 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.

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