(The following statement was released by the rating agency)
Sept 28 - Fitch Ratings has affirmed Cassa del Trentino SpA's (CdT) Long-term foreign and
local currency ratings at 'AA-' with Negative Outlooks and Short-term foreign currency rating at
CdT's ratings reflect the Province of Trento's ('AA-'/Negative/'F1+') continued
strong financial support and close control, which Fitch does not expect to
change in the medium term. The zero-notching between the province and CdT is
triggered by the guarantee provided by the province on CdT's debt under
provincial law 13/1973 art. 8bis. It is Fitch understanding that the same
guarantee will be provided to CdT's future issuances.
The Province of Trento is CdT's sponsor under Fitch's criteria "Ratings of
Public Sector Entities - Outside the United States", with a top down approach,
therefore any change in the sponsor's ratings would be reflected on those of
CdT. A downgrade for Cdt could also result from a change in statute and/or in
the legislative framework that weakens the link with the province.
Fitch expects CdT's net interest margin to remain in line with the 2010-2011
result and average EUR9m in 2012-2014. The company's net result, despite its
not-for-profit mission, should hover around EUR5m in Fitch's base scenario.
CdT's headcount has recently been expanded and is now consistent with the
company's operational needs The risk of an increase of rigid costs stemming from
new hiring is therefore limited and Fitch forecasts a substantial stability of
CdT's net result.
Starting from 2013, through a merger by incorporation of Tecnofin Trentina, the
province will directly hold 100% stakes in CdT, (currently 66% held by the
Province and the remaining by Tecnofin Trentina). The Province appoints CdT's
board of directors and regulates CdT's funding and disbursing criteria via a
service contract (convenzione). Fitch sees no risk of upcoming changes in CdT's
governance policy arising from upcoming new shareholder structure.
CdT's main activity continues to be disbursing funds on behalf of the province,
to finance local municipalities' and not-for-profit entities' investments. CdT
funds its activities by issuing bonds whose repayment is backed by provincial
subsidies. CdT also injected liquidity in the provincial system depositing
current resources of about EUR65m at end 2011 in Medio Credito Trentino Alto
Adige and Cassa Centrale Banca. The company's specific core business, with
respect to other local financial institutions and the strengthening role of
advisor of provincial entities - for issues such as liquidity management - leads
Fitch to regard as "high" the strategic importance of CdT for the Province.
Given the strict functional interrelation between CdT and the Province, Fitch
assesses the sustainability of CdT's debt incorporating it in the Province's
Fitch expects CdT's outstanding external debt to be close to EUR1bn up to end
2012-2013, up from the current EUR860m, and stabilize or slightly decline
afterwards. The likely setup of a new company, owned by the municipalities and
aimed at financing cities' investments, should gradually re-direct CdT's
activity to that of a consulting and funding entity for the Province itself and
its network of policy based companies. Debt sustainability should remain high
with CdT's debt forecasted by Fitch at roughly 1.0x Trento's operating balance
The match between liquidity and annual interest service is deemed sound by
Fitch with the latter forecasted to total about EUR50m in 2012-2013 and cash
close to EUR300m at end 2011. Supporting the rating equalization with its
sponsor is also CdT's access to liquidity lines from the Province in the
unlikely case of need as well as the possibility to retain interest proceeds
from financial investments as advances on future transfers from the province.