MOODY'S ASSIGNS Aaa ISSUER RATING AND PRIME-1 SHORT TERM RATING TO CHARBONNAGES DE FRANCE
Moody's Investors Service assigned a Aaa issuer rating and a Prime-1 short term rating to Charbonnages de France (CdF). The ratings reflect Moody's view that despite its structural financial imbalance, and expected growing debt burden, CdF will remain an instrument for the government's public policy, with very strong sovereign characteristics. This is the first time that Moody's has assigned a rating to CdF.
CdF is an EPIC (Etablissement Public … CaractŠre Industriel et Commercial) created in 1946 to act as a holding company for France's coal mining interests. Through two other EPICs, CdF operates France's remaining coal mines, which are being progressively wound down under a 1994 agreement, the coal pact. Because of high extraction costs, coal mining is a structurally loss-making activity in France. The coal pact anticipates that all coal mining operations will cease by 2005. Uncertainties remain as to CdF's future beyond 2005, but a number of obligations will remain, including social benefits to retirees, and decommissioning of the mines. These missions will continue to be carried out in a public policy framework. As such, Moody's believes that CdF's operations will continue to benefit from government support beyond 2005. CdF owns non-coal mining interests, mostly power generation, and coke production, which are owned by subsidiaries. Despite these diversification efforts, and despite significant equity contributions and subsidies received from the French government, CdF remains structurally loss making. As a result, Moody's expects that CdF's already high debt levels will continue to rise over the intermediate term.
As an EPIC, CdF cannot file for bankruptcy, and is ensured of ultimate financial assistance from the government. Moody's believes that because of the nature of CdF's mission, its legal status is unlikely to change. Consequently, CdF benefits from a strong support from the government. In addition, its institutional framework makes it an instrument of public policy. As such, it is likely to remain very close to the government's central interests. Moody's concluded that the French government will ultimately need to assume responsibility for the financing of the remaining obligations of CdF after 2005. In that respect, CdF is increasingly closer to a financing vehicle carrying a public service debt than to an operational entity.
Based in Rueil-Malmaison, Charbonnages de France is France's holding company for the country's coal mines. The group had 1997 revenues of FF 7.7 billion.
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