Nov 23 - Fitch Ratings has placed Societe Nationale des Chemins de fer
Francais (SNCF) and Reseau Ferre de France (RFF) 'AAA' Long-term Issuer Default
Ratings (IDR) and senior unsecured ratings and 'F1+' Short-term IDRs on Rating
Watch Negative (RWN).
The RWN reflects uncertainty surrounding the timeframe for the implementation of
the recently envisaged reform of the French railway sector and over the impact
this reform may have on SNCF and RFF structures, notably on their legal form.
Fitch will conduct a further review to clarify to what extent this would affect
SNCF and RFF.
The rating action follows the French government's announcement, on 30 October
2012, that it aims to create a "unified infrastructure manager" that will cover
the infrastructure divisions of SNCF and RFF, the French rail infrastructure
manager. Fitch will resolve the RWN once the agency has obtained additional
information about the extent and scope of this reform. Fitch acknowledges that
negotiations are ongoing but this reform should be presented as a bill to the
French Parliament at the end of H113. If the legislation is delayed and no other
source of resolution is available, the RWN could be prolonged.
Fitch understands that the status of the future unified infrastructure manager
is likely to be that of an Etablissement public a caractere industriel et
commercial (EPIC) hence it has affirmed both entities' 'AAA'/'F1+' ratings.
However, if the reform translates into a change of the status of SNCF and/or RFF
involving weaker support from the state or a significant weakening of the links
between the state and either of the two entities, the agency may remove the
ratings equalisation of SNCF, RFF or both of them with that of the French
sovereign. If the status was likely to change, the entities' underlying
financial strength could become their main rating factor.
As was already the case before the announcement of the reform, a negative rating
action could also result from a downgrade of France's sovereign rating, due to
the existing equalisation of the sovereign rating and SNCF and RFF's ratings.
Moreover, in the case of SNCF, Fitch will pay particular attention on the
likelihood SNCF may ask for state liquidity support in the context of increasing
debt of its subsidiaries operating in deregulated markets and also in the
context of reduction of the buffer of available cash resources through the
existing receivable held at Caisse de la Dette Publique receivable, which will
have significantly amortised after 2014.
Even if SNCF maintains its EPIC status after restructuring the timely state
support that Fitch would expect could theoretically be challenged. Extraordinary
liquidity support to SNCF could be classed as unlawful state aid under EU
regulations if it was used to support competitive businesses while the liquidity
buffer through the acceleration of the payments related to EUR3.7bn receivable
held at Caisse de la Dette Publique will be exhausted over the medium term. SNCF
has also adapted its funding policy so that it will not be in breach of EU
regulations on state aid as debt raised at the EPIC level for competitive
businesses within the SNCF group is charged at market price to these businesses,
therefore reducing the concerns about state aid issues. Bank liquidity lines
provide comfort that funding needs over the medium term will be
SNCF had sound 7.2% growth in consolidated revenue in 2011 due to a slight
recovery in freight and international passenger traffic and to the full
consolidation of the Keolis subsidiary into its revenue. At end-2011, SNCF
posted final net profit of EUR125m, down from EUR627m in 2010, mainly due to
asset depreciation. Net debt/operating EBITDAR was 5.0x in 2011 (2010: 7.0x).
Fitch will carefully monitor development of the group's debt share from
A full rating report on SNCF will shortly be available on www.fitchratings.com.
Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable criteria "Tax Supported Rating Criteria" dated 14 August 2012 and
"Ratings of Public-Sector Entities, Outside the United States" dated 5 March
2012, are available on www.fitchratings.com.
Applicable Criteria and