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May 16 (The following statement was released by the rating agency)
Fitch Ratings has revised Poste Italiane SpA (PI) Outlook to Stable from Negative, while affirming its Long-term Issuer Default Rating (IDR) at 'BBB+' and its Short-term IDR at 'F2'. Fitch has also affirmed PI's EUR2bn euro medium-term note programme (EMTN) at 'BBB+'/'F2' and its EUR750m bond issues (XS0944435121) at 'BBB+'.
KEY RATING DRIVERS
The Outlook change follows a similar action on the Republic of Italy's sovereign ratings (see Fitch Revises Italy's Outlook to Stable, Affirms at 'BBB+' dated 25 April 2014 at www.fitchratings.com) as per the agency's 'Rating of Public Sector Entities Outside the United States' criteria. The Italian government is PI's sponsor.
Fitch expects the strong linkage between PI and the national government to persist over the medium term. The national government plans to list PI on the stock exchange in 2014 while retaining a 60% majority stake, in Fitch's view, to continue to exercise control and strategic direction over PI. PI plays a key role in channelling funds to the public sector as well as in providing universal postal and public-like services such as tax collections and pension payment.
The Outlook change also considers PI's financial performance for 2013, which is in line with Fitch's expectations. Performance was underpinned by growing insurance services amid continued decline in universal postal services and by fairly stable financial services. The company posted net profit of EUR708m in 2013, rising to EUR1bn at the group level. Fitch expects PI's net profit to be around EUR0.7bn over the medium term. Potential growth of commissions (2013: EUR2bn) from Cassa Depositi and Prestiti and Poste Vita for the distribution of savings certificates and insurance policies may offset an eventual slowdown of profitability of the insurance sector.
At the group level Fitch continues to expect PI's debt to be around 2x the EBITDA, excluding medium-term borrowing from ECB, which in 2013 stood at EUR4.2bn. Liquidity is comfortable as PI has no material refinancing needs until 2018, with fairly sound cash flow from operations of more than EUR1bn and liquidity averaging EUR1.4bn at the group level.
PI was involved in the recapitalisation of Italy's flagship airline Alitalia in 2013, with an investment amount of EUR75m, pending negotiations with an industrial partner. Etihad is negotiating to take a stake of up to 49% in Alitalia in a new round of equity injections, which may involve further contributions from PI. Fitch assumes that PI will limit its exposure to the airline to about 1% of its consolidated balance sheet, and its equity interest in Alitalia to remain around 20%.
The ratings and Outlook over the medium term will continue to reflect those of the sovereign in light of the credit linkage.
A negative rating action may also be triggered by an unexpected deterioration of PI's operating performance if Fitch were to conclude that it was reflective of lower financial support and/or integration with the national government. Weaker links with the government via a divestment of more than 50% stake, or a lower level of integration with the government, with PI retreating from public service functions may lead to a rating change and/or to a change in the rating approach.