PARIS/BARCELONA, December 06 (Fitch) Fitch Ratings has affirmed
the Region of
Bretagne's Long-term local and foreign currency ratings at 'AA'
Short-term foreign currency rating at 'F1+'. The Outlook is
KEY RATING DRIVERS
The ratings are based on the region's strong budgetary
performance, low debt,
and sophisticated financial management. The ratings also factor
in a steep rise
in debt due to high capital expenditure until 2016 amid a weaker
capacity. The Stable Outlook highlights Fitch's opinion that the
financial profile will be maintained and that the region will
indebtedness at levels that are compatible with the ratings.
Fitch estimates that the operating margin should have improved
in 2013 to 27.6%
due to the moderate pace of expenditure, a healthy tax base and
of deferred revenue items.
Its current margin of 26.8% is high compared with peers.
is low, however, due to limited tax leeway and largely
(staff, mandatory transfers, multiyear contracts).
Fitch expects operating performance to deteriorate through to
2016 and the
current margin to fall to 21%. This is mostly due to a decline
of revenue caused
by cuts in state transfers. Operating expenditure is likely to
grow modestly by
1.2% per year until 2016, provided the region offsets dynamic
(staff, train services, education) with curbs on its most
We expect a sizeable rise in capital expenditure, as Bretagne
the regional high-speed railway system and invest in harbour
while maintaining capital programmes in other areas. This will
push up average
annual capital expenditure to EUR526m between 2013 and 2016 from
2008. A weaker current margin and rising capital expenditure
will result in a
much lower self-financing rate, of 55% on average after debt
2013 to 2016, from an average 93% since 2008.
Debt is low but is likely to have risen in 2013 to 44.4% of
current revenue due
to growing capital expenditure. Fitch expects debt to surge to
111% of capital
revenue by 2016 owing to a weaker self-financing capacity and
spending. We expect debt service coverage to remain comfortable,
but the debt
payback ratio should deteriorate to 5.3 years at end-2016 from
1.7 years at
Main economic indicators (unemployment, GDP per capita) are
better than the
national average, due to a well-diversified economy, skilled
strong population growth. Difficult restructuring of key sectors
agro industries) have recently led to an accelerated
deterioration of the
economy in some areas, notably those most dependent on
particular sectors or
The region has a track record of reliable financial forecasting,
owing to a
modern budgetary framework. Fitch believes this underpins the
to anticipate adverse developments and to help ensure that its
financial targets are met.
Inability to adjust expenditure to match revenues, leading to a
ratio consistently above seven years, could result in a
A strong budgetary performance resulting in debt metrics
outperforming our expectations could lead to an upgrade.
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Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22,
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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 9 April 2013 on www.fitchratings.com.
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