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TEXT-S&P affirms Cassa Depositi e Prestiti at 'BBB+/A-2'
November 14, 2012 / 5:15 PM / in 5 years

TEXT-S&P affirms Cassa Depositi e Prestiti at 'BBB+/A-2'

     -- We consider there is an "almost certain" likelihood that the Italian 
government would provide timely and sufficient extraordinary support to Cassa 
Depositi e Prestiti SpA (CDP) in the event of financial stress.
     -- We are affirming the long- and short-term issuer credit ratings on CDP 
at 'BBB+/A-2'.
     -- The outlook remains negative, reflecting the negative outlook on the 
Republic of Italy.

Rating Action
On Nov. 14, 2012, Standard & Poor's Ratings Services affirmed its 'BBB+/A-2' 
long- and short-term issuer credit ratings on Cassa Depositi e Prestiti SpA 
(CDP). The outlook remains negative.

The ratings on Italy-based lending institution, Cassa Depositi e Prestiti SpA 
(CDP), are based on an equalization with the unsolicited long-term sovereign 
credit rating on the Republic of Italy (BBB+/Negative/A-2), reflecting our 
opinion that there is an "almost certain" likelihood that the Italian 
government would provide timely and sufficient extraordinary support in an 
event of financial stress.

In accordance with our criteria for government-related entities, our rating 
approach is based on our view of CDP's:

     -- "Critical" role through its public policy mandate. CDP is the main 
finance provider for national and local infrastructure projects undertaken by 
regional governments, local authorities, and public-law entities. CDP's 
exposure to state risk on the asset side is substantial, accounting for about 
one-half of its loan portfolio.
     -- "Integral" link with the Italian government. The government is legally 
required to be the majority state owner, and provides an explicit guarantee on 
the vast majority of CDP's obligations. The Italian state also exercises 
operational and management control and tight supervision over the CDP.

In its "segregated activity" (SA), CDP provides loans to state, local, and 
regional governments and public-law entities for the financing of capital 
investments. This is CDP's traditional, publicly mandated lending activity, 
accounting for 95% of the loan book as of end-June 2012. CDP refinances SA 
loans through sovereign-guaranteed postal savings instruments, capturing the 
savings of the general public, as well as through covered bonds. The vast 
majority of CDP's liabilities are made up of these postal savings instruments.

Since 2009, a number of regulatory changes have widened the scope of projects 
eligible for funding through CDP's SA to include, among others, operations 
undertaken in conjunction with and co-financed by EU member states and 
institutions, projects carried out via public-private partnerships, financing 
of small and midsize enterprises through commercial banks, and the provision 
of additional support for exporters. In 2010, CDP amended its articles of 
association to allow its participation in investment funds whose purposes 
coincide with those of CDP. In 2011, its operations were extended to acquiring 
equity holdings in companies of major national interest with stable financial 
positions and growth potential. In our view, this extension of eligible 
projects funded through the SA indicates the government's desire to make 
increased use of the extensive liquidity available to CDP, and keep the 
borrowing off its own balance sheet. Projects under the new remit can now be 
undertaken on the basis of long-term economic value as well as more usual 
financial eligibility criteria, which could increase the risk undertaken on 
the loan portfolio from extremely low levels.

Through its infrastructure or "ordinary activity" (OA), CDP provides funding 
to private- or public-infrastructure concessionaires. OA loans are financed 
through borrowings without explicit sovereign guarantees and account for 5% of 
the loan book. In principle, if OA cash flow were to become insufficient, OA 
obligations might not be served on a timely basis by the government. In such a 
stress scenario, OA debtholders would have access to any and all of the assets 
held by CDP, other than those backing CDP's covered bonds. Furthermore, SA 
assets can be lent internally to OA to ensure payments on OA obligations. This 
internal transaction should not increase the default probability of SA 
obligations because these are guaranteed by the sovereign. In practice, it can 
be assumed that even the nonguaranteed part of CDP's obligations would be 
serviced pari passu with the SA obligations, and therefore with the 
sovereign's own obligations.

As part of a government strategy to reduce the public-sector debt burden, CDP 
is expected to purchase SACE SpA, SIMEST SpA, and Fintecna Spa from the state 
by the end of 2012, in addition to the shares in SNAM SpA (A-/Negative/A-2) 
that it purchased from Eni SpA (A/Negative/A-1). We believe the integration of 
SACE and SIMEST into CDP's activities is consistent with CDP's mandate and 
will enhance its public policy role. We expect these transactions will 
negatively affect our view of CDP's future capital and earning positions and 
reduce its liquidity. The book value of the three state-owned companies totals 
about EUR9 billion, and we expect this would be funded by a draw-down of 
liquidity. The purchase of SNAM shares was financed by reduction of 
shareholding in Eni and, much less so, by a draw-down of liquidity.

The negative outlook reflects that on the Republic of Italy. We expect OA 
loans to increase gradually, but to stay well within 10% of total loans and at 
less than 50% of CDP's liquidity (less than 4% as of June 2012) in the next 
few years. However, if these limits were breached, and CDP's non-guaranteed OA 
liabilities were to substantially increase, the ratings might come under 

Moreover, if the Italian government's strategy to reduce its own debt were to 
substantially weaken CDP's financial profile, and if the government were to 
redirect CDP's activities away from its current public policy role, we could 
reassess the likelihood of extraordinary support from the state. A reduction 
of sovereign support could lead us to lower the ratings on CDP.

Related Criteria And Research
     -- Rating Government-Related Entities: Methodology And Assumptions, Dec. 
9, 2010

Ratings List
Ratings Affirmed

Cassa Depositi e Prestiti SpA
 Issuer Credit Rating                   BBB+/Negative/A-2  
 Senior Unsecured                       BBB+               

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at Use the Ratings search box located in the left 

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