July 18, 2014 / 4:57 PM / in 3 years

Fitch Revises Patrimonio del Trentino's Outlook to Stable; Affirms at 'A-'

(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 the Long-term Foreign and Local Currency Issuer Default Ratings (IDR) at 'A-'. Fitch has also affirmed the Short-term foreign currency IDR at 'F2'. Its bond issues (IT0004661523, IT0004300965) were affirmed at 'A-'. KEY RATING DRIVERS PDT's Outlook change follows a similar rating action on the Autonomous Province 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 Sector Entities - Outside the United States'. The province has full ownership and extensive control of PDT and provides financial support for PDT's growing debt. This has led Fitch to believe that 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 province's guarantee. Debt outstanding includes a EUR30m amortising 20-year loan contracted from the European Investment Bank (EIB) in 2013 and a four-year amortising bond of EUR43m issued in March 2014 to refinance bonds used to build the "MUSE" science museum. 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 unsubsidised borrowing. 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 milestone projects, 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, however, likely to remain around 1%, with about EUR2m-EUR3m profit, leaving limited room for un-subsidised borrowing as rental income is often at below market rates. PDT's liquidity remains somewhat volatile but the company benefits from the centralised liquidity system the province has set up for all its subsidiaries: 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. RATING SENSITIVITIES As PDT's IDR is credit linked to PAT, its rating is sensitive to any rating 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 ratings, leading to a rating equalisation with PAT. Conversely a dilution of provincial support as evidenced by material unsubsidised borrowing or income losses not compensated by support from PAT may lead to a downgrade, thereby widening PDT's rating notch differential from the sponsor to two. Contact: Primary Analyst Raffaele Carnevale Senior Director +39 02 87 90 87 203 Fitch Italia S.p.A. 6, Via Morigi 20123 Milan Secondary Analyst Claudio Cappelli Analyst +39 02 87 90 87 260 Committee Chairperson Guilhem Costes Senior Director +34 93 323 8410 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. 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 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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