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Rating Action:

Moody's downgrades 3CIF's debt and deposit ratings to Baa1; maintains review with direction uncertain

Global Credit Research - 28 Aug 2012

Short-term ratings downgraded to Prime-2

Paris, August 28, 2012 -- Moody's Investors Service has today downgraded the long- and short-term debt and deposit ratings of Caisse Centrale du Crédit Immobilier de France (3CIF) - the rated funding entity of Crédit Immobilier de France group (CIF; unrated) - to Baa1 and Prime-2 from A1 and Prime-1, respectively. The rating agency is maintaining its review on these ratings, now with direction uncertain.

While the Baa1 long-term ratings continue to incorporate nine notches of systemic support (from 12 notches previously), the downgrade is based on Moody's assessment of a rising probability of a run-off scenario for the CIF banking group, and associated transition risks for creditors. This reflects the hurdles in arriving at a long-term solution to the group's structural funding challenges. At the same time, the rating agency considers that the French authorities are keen on addressing the current situation shortly, which may result in CIF being acquired by a long-term investor. The continuing review on all of 3CIF's ratings with direction uncertain reflects the current uncertainty about the future of the bank.

RATINGS RATIONALE

Moody's decision to downgrade 3CIF's long- and short-term debt and deposit ratings to Baa1 and P-2 from A1 and P-1, respectively, is based on the rating agency's assessment that the probability of a run-off scenario has increased. However, Moody's still believes that the French public sector will orchestrate an orderly resolution for CIF, in the absence of a strategic transaction. Our view is that a run-off scenario would involve financial support being provided to the bank by the French authorities. This view is reflected in the incorporation of nine notches of systemic support in 3CIF's long-term ratings.

In the short term, as CIF has no longer access to the capital markets, the repayment of debt maturing in early October, notably a €1.75 billion covered bond issue (source: CIF Euromortgage's annual accounts 2011), will probably require liquidity assistance from the central bank absent a long-term solution.

Against this background, CIF started a sale process in June 2012. State-owned La Banque Postale (LBP, unrated) has publicly declared that it would consider CIF in the context of its own development plans. At present and to Moody's knowledge, LBP or any other investors have not made any offer to CIF. Although Moody's views LBP's decision as likely to be significantly influenced by the position of the French authorities, the rating agency notes that LBP's management is currently focusing on a number of important projects, among which its involvement in the financing of the French public sector in the context of Dexia Crédit Local's restructuring (Baa2, negative; E/caa1, stable).

A run-off scenario is probably not the preferred solution of the French authorities due to the importance of the bank's lending activities to the French housing market, especially in assisting less privileged households. Nevertheless in the absence of visibility on LBP's decision and of a rapid resolution, and despite the high likelihood of a transaction materializing eventually, in Moody's opinion, the probability of a run-off of CIF's businesses or other solutions has increased. Those scenarios may involve asset-liability mismatches that could require funding from state-guaranteed debt issuance and/or central bank assistance over a sustained period of time. Today's rating actions reflect the increased likelihood of such scenarios, which Moody's believes could potentially be less favorable for creditors than an acquisition by a strong strategic partner.

These considerations are reflected in the rating agency's decision to continue its review, now with direction uncertain, on 3CIF's debt and deposit ratings.

WHAT COULD CHANGE THE RATINGS UP / DOWN

Moody's could upgrade 3CIF's standalone BFSR and debt and deposit ratings in the event of a material and sustained improvement in funding conditions for the group, most likely stemming from a strategic transaction involving a business partner of strong credit standing.

Conversely, Moody's could downgrade 3CIF's debt and deposit ratings in the absence of an improvement in the bank's financing prospects or of a rapid materialisation of external support, or if a run-off of the bank's businesses orchestrated by the French authorities is detrimental to creditors.

PRINCIPAL METHODOLOGIES

The methodologies used in these ratings were Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

This rated entity or its agent(s) participated in the rating process. The rated entity or its agent(s) provided Moody's access to the books, records and other relevant internal documents of the rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following : parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information,.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Guillaume Lucien-Baugas
Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carola Schuler
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades 3CIF's debt and deposit ratings to Baa1; maintains review with direction uncertain
No Related Data.

 

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