NOTE: On June 19, 2012, the press release was revised as follows: Correct the list of assignments as follows:
..Issuer: Administrador de Infraestruct. Ferroviarias
.... Probability of Default Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
.... Corporate Family Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
..Issuer: Corp. Reser. Estrategicas Prod. Petroliferos
.... Probability of Default Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
.... Corporate Family Rating, Assigned Ba1; Placed Under Review for Possible Downgrade. Revised release follows:
Madrid, June 15, 2012 -- Moody's Investors Service has today downgraded the long-term
ratings of Corporacion de Reservas Estrategicas (CORES) and Administrador
de Infraestructuras Ferroviarias (Adif) by three notches to Ba1 from Baa1.
Concurrently, Moody's will withdraw both entities issuer ratings
and has assigned Ba1 corporate family rating (CFR) and Ba1 probability
of default rating (PDR). In addition, Moody's has downgraded
the short-term rating of Adif to Not-Prime from Prime-2.
Moody's has today also placed on review for further downgrade the
long-term ratings of the two entities, in line with the review
for downgrade initiated on the sovereign ratings. The review process
is expected to conclude within a maximum timeframe of three months.
A full list of all affected ratings is provided towards the end of this
press release.
Today's actions follow the weakening of the Spanish government's
creditworthiness, as captured by Moody's downgrade of Spain's
government bond ratings to Baa3 from A3 on 13 June 2012, and the
initiation of a review for further downgrade. For more details
on the rationale for the sovereign downgrade, please refer to the
press release http://www.moodys.com/research/Moodys-downgrades-Spains-government-bond-rating-to-Baa3-from-A3--PR_248236.
RATINGS RATIONALE
Despite the lack of explicit government guarantees, the link between
the ratings of these companies and that of the sovereign is based on their
status as government-related entities (GRIs), their strategic
importance to Spain and the very strong government support that is incorporated
within their ratings. The ratings of CORES and Adif also consider
the entities' standalone credit profiles and legal characteristics,
including their bylaws and/or their public-law status, as
well as Moody's assumption that these entities will remain key instruments
for the Spanish government's public sector management, its
railroad infrastructure policy and its strategic oil reserves policy.
Moody's three-notch downgrade of CORES and Adif to Ba1 positions
their ratings one notch below that of Spain, partly to reflect the
lack of explicit guarantees from the Spanish government, but also
the relative weakness in their underlying credit profiles compared with
the credit strength of the sovereign. Additionally, despite
the very high likelihood of support by the government given its close
links with these GRIs, Moody's one-notch differentiation
between the two companies' ratings and the sovereign rating reflects
(i) a degree of uncertainty regarding the timely provision of support
in the event of need; and/or (ii) a modest degree of risk that,
over the rating horizon and in potential stress scenarios that simultaneously
affect various issuers requiring support, a more selective approach
to the provision of support might be considered by the government.
Moody's applies a credit-substitution approach for both CORES
and Adif that considers the companies' particular funding and business
models. Therefore, the rating agency does not publish a granular
analysis of typical GRI factors (i.e., covering support,
dependence, a baseline credit assessment (BCA) and the sovereign
rating).
Moody's remains concerned about CORES's liquidity risk.
Although CORES has covered its refinancing requirements throughout 2012,
the company has debt maturities of around EUR600 million in 2013.
At this point, it is not clear how CORES plans to refinance this
debt.
Adif does not have any significant debt maturities over the next 12 months,
but needs to continue to fund its investment programme through existing
bank loans.
RATIONALE FOR REVIEW FOR DOWNGRADE
Moody's decision to place the ratings on review for downgrade follows
the review process for Spain's sovereign rating and reflects the
rating agency's view that risks remain regarding the Spanish government's
finances.
WHAT COULD CHANGE THE RATINGS UP/DOWN
In the absence of a change in the nature and standalone profiles of these
entities, or in the perceived strength of the underlying sovereign
support, Moody's expects the ratings of CORES or Adif to be
primarily driven by Spain's sovereign rating.
Moody's cautions that these entities do not benefit from explicit
guarantees from the Spanish government. Therefore, the rating
agency could further widen the gap between the ratings of these GRIs versus
those of the sovereign in response to any indication of a change in (i)
the government's willingness or ability to intervene in a timely
manner to support these GRIs in the event of need; and/or (ii) its
propensity to support or encourage a more selective approach and thereby
differentiate the rank order of support needs among all potential calls
on government funding.
Downward pressure on the rating of CORES could also develop if its liquidity
profile deteriorates beyond Moody's expectations, or if the
company's headroom (as reflected in the ratio measuring asset coverage
of debt) weakens materially. Similarly, downward pressure
on the rating of Adif could develop if Moody's becomes concerned
about the company's liquidity risk profile.
In view of today's action, and the review process of the ratings,
Moody's does not currently envisage any positive short-term
ratings pressure for CORES or Adif.
For additional information on rating factors, please refer to the
individual issuer credit opinions, available on www.moodys.com.
LIST OF AFFECTED RATINGS
Downgrades:
..Issuer: Administrador de Infraestruct. Ferroviarias
.... Issuer Rating, Downgraded to NP
from P-2
.... Issuer Rating, Downgraded to Ba1
from Baa1; Placed Under Review for further Possible Downgrade
..Issuer: Corp. Reser. Estrategicas
Prod. Petroliferos
.... Issuer Rating, Downgraded to Ba1
from Baa1; Placed Under Review for further Possible Downgrade
....EUR1500M Senior Unsecured Medium-Term
Note Program, Downgraded to (P)Ba1 from (P)Baa1; Placed Under
Review for further Possible Downgrade
....EUR500M 4.5% Senior Unsecured
Regular Bond/Debenture Apr 23, 2018, Downgraded to Ba1 from
Baa1; Placed Under Review for further Possible Downgrade
Assignments:
..Issuer: Administrador de Infraestruct. Ferroviarias
.... Probability of Default Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
.... Corporate Family Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
..Issuer: Corp. Reser. Estrategicas
Prod. Petroliferos
.... Probability of Default Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
.... Corporate Family Rating, Assigned Ba1; Placed Under Review for Possible Downgrade
Outlook Actions:
..Issuer: Administrador de Infraestruct. Ferroviarias
....Outlook, Changed To Rating Under
Review From Negative
..Issuer: Corp. Reser. Estrategicas
Prod. Petroliferos
....Outlook, Changed To Rating Under
Review From Negative
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Government-Related
Issuers: Methodology Update published in July 2010. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
Both companies are headquartered in Madrid, Spain. CORES
is the organisation responsible for managing the strategic oil reserves
and controlling compulsory reserves (petroleum products and natural gas)
in Spain. By law, all companies authorised to distribute
oil products in Spain -- both operators and importers --
must be members of CORES and pay it monthly fees or risk losing their
licence.
Adif benefits from a special legal status as an Entidad Pública
Empresarial, reflecting its 100% state ownership and critical
importance as a major part of the country's transport infrastructure.
Adif exhibits a strong business risk profile, primarily derived
from its natural monopoly position as the national railway infrastructure
manager. It is responsible for (i) owning and managing Spain's
railway infrastructure, including tracks, stations and freight
terminals on behalf of the government; (ii) managing rail traffic;
(iii) distributing capacity to rail operators; and (iv) collecting
fees for infrastructure, station and freight terminal use.
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.
The ratings have been disclosed to the rated entities or their designated
agent and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings 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
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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 entities or their 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.
Carlos Winzer
Senior Vice President
Corporate Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paloma San Valentin
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades two Spanish government-related entities following sovereign downgrade
