(The following statement was released by the rating agency)
MILAN/LONDON, July 18 (Fitch) Fitch Ratings has revised
Patrimonio del Trentino
S.p.A.'s (PDT) Outlook to Stable from Negative, while affirming
Foreign and Local Currency Issuer Default Ratings (IDR) at 'A-'.
Fitch has also
affirmed the Short-term foreign currency IDR at 'F2'. Its bond
(IT0004661523, IT0004300965) were affirmed at 'A-'.
KEY RATING DRIVERS
PDT's Outlook change follows a similar rating action on the
of Trento (PAT, 'Fitch Revises Trento's Outlook to Stable,
Affirms at 'A'' dated
18 July 2014 at www.fitchratings.com), which is PDT's sponsor.
PDT plays a key
role in the province's management strategy by managing its real
estate assets as
well as those of the province. PDT's Long-term IDR is notched
down once from
PAT's IDR to reflect strong integration with and control by the
sponsor, as well
as a lack of an explicit guarantee on all liabilities. Fitch
uses a top-down
approach to rate PDT, as part of its criteria "Rating of Public
- Outside the United States'.
The province has full ownership and extensive control of PDT and
financial support for PDT's growing debt. This has led Fitch to
extraordinary support for PDT will be forthcoming if need be.
PDT's EUR150m of bonds and loans either are direct obligations
of the province
or are backed by provincial multi-annual subsidies, and/or the
guarantee. Debt outstanding includes a EUR30m amortising 20-year
from the European Investment Bank (EIB) in 2013 and a four-year
of EUR43m issued in March 2014 to refinance bonds used to build
PDT's 2014-2016 business plan envisages EUR130m of capital
spending, mainly on
the upgrading of the trade fair in Riva del Garda and a new
conference centre in
Trento. Under Fitch's base case scenario, the investment plan
will be largely
financed by debt subsidised by the province, which will rise
towards EUR250m by
2016, from EUR150m in 2013, although PDT could explore
Fitch expects PDT to continue to post small net income over the
medium term, in
line with its not-for profit mission. The completion of two
such as the new "MUSE" science museum and the new biotechnology
faculty of the
University of Trento, will result in an increase in rental
income by about 50%
to about EUR6m-EUR7m per annum. PDT's return on equity (ROE) is,
to remain around 1%, with about EUR2m-EUR3m profit, leaving
limited room for
un-subsidised borrowing as rental income is often at below
PDT's liquidity remains somewhat volatile but the company
benefits from the
centralised liquidity system the province has set up for all its
PDT has access to credit lines from the sponsor's treasury bank
(law 4/1975 art.
5) and the province can advance subsidies to PDT (law 7/1979
art. 9 bis),
mitigating liquidity risk at the stand-alone level.
As PDT's IDR is credit linked to PAT, its rating is sensitive to
action on the province.
More formalised support from the province, such as an explicit
guarantee on all
financial liabilities, could trigger a positive action on PDT's
to a rating equalisation with PAT. Conversely a dilution of
as evidenced by material unsubsidised borrowing or income losses
by support from PAT may lead to a downgrade, thereby widening
PDT's rating notch
differential from the sponsor to two.
+39 02 87 90 87 203
Fitch Italia S.p.A.
6, Via Morigi
+39 02 87 90 87 260
+34 93 323 8410
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available on www.fitchratings.com
Applicable criteria 'Tax-Supported Rating Criteria' dated 14
August 2012 and
'Rating of Public Sector Entities Outside the United States'
dated 4 march 2014,
are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
Rating of Public-Sector Entities - Outside the United States
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