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TEXT - Fitch affirms Caisse des Depots et Consignations
December 28, 2012 / 4:41 PM / 5 years ago

TEXT - Fitch affirms Caisse des Depots et Consignations

(The following statement was released by the rating agency)
    Dec 28 - Fitch Ratings has affirmed Caisse des Depots et Consignations
(CDC)'s Long-term Issuer Default Rating (IDR) at 'AAA' and Short-term IDR at
'F1+'. The Outlook is Negative, mirroring that on the Republic of France's
Issuer Default Rating. A full list of rating actions is at the end of this
comment.

RATING RATIONALE

CDC's ratings are underpinned by the implicit solvency guarantee from the French
state ('AAA'/Negative/'F1+'), stemming from CDC's status as a special public 
agency and extending to all CDC's obligations. They also reflect CDC's strategic
importance as main manager of the regulated savings deposits collected by French
banks, administrator of several public pension schemes and the custody of legal 
professions deposits. 

CDC's legal status of "special agency" (etablissement special), fully state 
controlled, is unique in France. However, Fitch considers that CDC enjoys the 
same implicit solvency and liquidity guarantee as other French public agencies 
(etablissements publics), under Law 80-539. Consequently, its IDRs are aligned 
and move in tandem with those of the French sovereign. 

CDC's ratings also take into account its close monitoring by the French state, 
notably through its supervisory board. Although CDC is not a bank and therefore 
not subject to capital adequacy ratios, although the Prudential Control 
Authority, France's bank regulator gives its opinion of CDC's capital adequacy. 


CDC is entrusted with the management of most of the regulated savings deposits 
(notably Livret A) collected by French banks, administrates several public 
pension schemes and the deposits of legal professions. In addition, among its 
mandates, CDC is the institutional lender to Agence Centrale des Organismes de 
Securite Sociale (commercial paper and Euro CP rating 'F1+'), the French Social 
Security Agency. CDC is also France's leading long-term institutional investor, 
supporting economic development, and performs several other public-interest 
missions on behalf of the state.

CDC also operates competitive activities in sectors such as insurance - it has a
40% stake in CNP Assurances, France's largest life insurer- postal services - it
has a 26.3% in La Poste ('AA'/Negative/'F1+') - economic support with 50% stake 
in the newly created Public Investment bank (BPI), as well as in leisure, 
services, real estate and private equity, and through a large portfolio of 
listed French companies. At 31 December 2011, CDC had a consolidated asset base 
of EUR262.3bn, of which EUR209.3bn was securities.

CDC's results tend to be volatile, mainly due to its equity portfolio: Over 
2008-2011, CDC's net results were fluctuating from a EUR1.3bn consolidated net 
loss in 2008, turned to a consolidated net surplus of EUR3.2bn in 2010 -after a 
consolidated net surplus of EUR2.5bn in 2009-and a reduced consolidated net 
income of EUR980m in 2011 mainly due to Dexia's impairments. 

Fitch expects CDC's performance to remain fragile in 2012 amid a deteriorated 
credit and stock market environment and some changes in accounting perimeters, 
notably CDC's holding since 2012 of a majority share in Veolia Transdev.  

CDC's liquidity is robust, thanks to (social accounts) reserves amounting to 
around EUR18.5bn and an outstanding of deposits of legal professions totalling 
around EUR36.7bn in Q312. Furthermore, CDC's liquidity needs are largely covered
through a EUR30bn global commercial paper programme, and a EUR20bn CD programme.
Moreover CDC Group's strong overall standalone liquidity at year-end 2011 was 
underpinned by the considerable EUR223bn funding collected on saving accounts 
(accounted in the Savings Funds section), and, lastly by its equity portfolio of
EUR12.5bn. 

OUTLOOK NEGATIVE

The Negative Outlook reflects the Outlook on France's sovereign ratings. 
Although highly unlikely, a change in CDC's legal framework and lower state 
support could trigger a downgrade. Any negative action on France's sovereign 
ratings would also be automatically reflected by CDC's ratings.

KEY ASSUMPTIONS AND SENSITIVITIES

CDC's ratings depend on those of France, which are based on some key assumptions
regarding macroeconomic and budgetary performance.

Fitch forecasts growth of 0.3% in 2013 and 1.1% in 2014 before the economy 
converges to an assumed medium-term trend rate of growth of 1.6% in 2016. This 
compares with the government forecast of 0.8% growth in 2013 rising to 2% from 
2014. 

Fitch expects general government gross debt (GGGD) to GDP to peak at 94% in 2014
and gradually decline thereafter to 89% by 2017 while the government projects a 
peak of 91.3% in 2013 declining to 82.9% by 2017.

France's rating also incorporates Fitch's assumption that the government will 
adhere to its commitments under the Stability and Growth Pact, Fiscal Compact 
and as set out in its Multiyear Public Financing Plan.

The rating is potentially sensitive to policy actions that would materially 
increase public debt and/or contingent liabilities as a result of state 
intervention in the domestic economy and industry.

A significant weakening of France's financial profile would likely undermine its
ability and willingness to provide support to its dependent entities. Therefore,
under Fitch's rating criteria on public sector entities outside the US, this 
could potentially justify a notching-down of CDC's ratings from those of France,
up to three notches.

The rating actions are as follows:

- Long-term IDR: affirmed at 'AAA'; Outlook Negative
- Short-term IDR: affirmed at 'F1+'
- EUR18.5bn EMTN programme: affirmed at 'AAA/F1+'
- EUR1bn BMTN programme: affirmed at 'AAA'
- EUR20bn CD programme: affirmed at 'F1+'
- EUR30bn global CP programme: affirmed at 'F1+'
- Senior unsecured notes: affirmed at 'AAA'

 (Caryn Trokie, New York Ratings Unit)

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