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Fitch Places Autonomous Community of Catalonia and Institut Catala de Finances on RWN
September 29, 2014 / 6:07 PM / 3 years ago

Fitch Places Autonomous Community of Catalonia and Institut Catala de Finances on RWN

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Autonomous Community of Catalonia - Rating Action Report here BARCELONA, September 29 (Fitch) Fitch Ratings has placed the Autonomous Community of Catalonia's (Catalonia) and Institut Catala de Finances' (ICF) Long-term foreign and local currency Issuer Default Ratings (IDR) of 'BBB-' on Rating Watch Negative (RWN). Their Short-term foreign currency IDRs of 'F3' have also been placed on RWN. Catalonia's EMTN programme and bond issues, rated 'BBB-', were also placed on RWN. Under EU credit rating agency (CRA) regulation, the publication of International Public Finance reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations. Fitch interprets this provision as allowing us to publish a rating review in situations where there is a material change in the creditworthiness of the issuer that we believe it inappropriate for us to wait until the next scheduled review date to update the rating or Outlook/Watch status. The last scheduled review date for Fitch's ratings of the Autonomous Community of Catalonia was on 25 July 2014 and the next review date for 2015 has not yet been set. KEY RATING DRIVERS The Rating Watch action reflects increased tensions between the central and regional government of Catalonia following the latter's unilateral call for a non-binding consultation on the future of the region within Spain or as an independent country, on 9 November. The Rating Watch action on ICF reflects the credit links of the institute to Catalonia. The President of Catalonia, Artur Mas, signed the law calling for the non-binding "consultation" to be held on 9 November. However, the central government has labelled this consultation as a referendum in disguise, adding that only the central government can call a referendum. The central government will be submitting a recourse to the constitutional courts to provisionally freeze the process. Nevertheless, tensions between both governments are likely to increase, particularly in the run-up to the consultation date. Presently Catalonia is at the rating floor that Fitch introduced for all Spanish regions on 8 March 2013 of 'BBB-'. The rating floor was established to reflect the central government's support for autonomous communities through various instruments, including access to the regional liquidity fund (FLA). However, this floor is also subject to the co-operative relationship between the regions and the central government and Fitch considers this as difficult in the case of Catalonia under present circumstances. Fitch believes that Catalonia will require additional funding from the FLA in 2015 and because of difficulties in accessing the international capital markets the region is likely to remain highly dependent on FLA for funding. International investors are also unlikely to purchase bonds issued by the regional government given present political uncertainty. Although Fitch expects that the central government would continue to financially support Catalonia, as a default would have negative implications for all regions trying to access the capital markets, as well as for the central government, Fitch believes that developments over the next six weeks are likely to complicate the relationship between Catalonia and the central government. Fitch will closely monitor the steps that both the central and regional governments would take in the run-up to the consultation date to ensure readily available financial support from the central government, which is key to maintaining the rating floor for Catalonia. Fitch will maintain the rating floor for all other Spanish regions. RATING SENSITIVITIES Fitch expects to resolve the rating watch within the next three to six months pending developments over the consultation. If the floor is removed for Catalonia, the region's rating is likely to be downgraded by at least two notches. Contacts: Primary Analysts Guilhem Costes (Catalonia) Senior Director +34 93 323 8410 Fitch Ratings Espana, S.A.U. Paseo de Gracia, 85, Barcelona 08008 Ines Callahan (ICF) Associate Director +34 93 323 8747 Fitch Ratings Espana, S.A.U. Paseo de Gracia, 85, Barcelona 08008 Secondary Analysts Patricio Novales (Catalonia) Analyst +34 93 467 8417 Guilhem Costes (ICF) Senior Director +34 93 323 8410 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@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 outside the United States", dated 23 April 2014 and "Ratings of Public Sector Entities" dated 4 March 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Tax-Supported Rating Criteria here International Local and Regional Governments Rating Criteria - Outside the United States here Rating of Public-Sector Entities - Outside the United States here Additional Disclosure Solicitation Status here ALL 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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