MOODY'S LOWERS CREDIT AGRICOLE'S RATINGS TO Aa2/B+, UPGRADES CREDIT LYONNAIS TO Aa3 AND CONFIRMS ITS B- FINANCIAL STRENGTH RATING; ALL RATINGS HAVE A STABLE OUTLOOK
Approximately $13.5 Billion of Debt Securities Affected.
Paris, May 22, 2003 -- Paris, May 22, 2003 -- Moody's Investors Service
lowered to Aa2/B+ from Aal/A- the senior long-term
debt and financial strength ratings of Credit Agricole S.A..
At the same time, the long-term debt rating of Credit Lyonnais
was raised to Aa3 from A1 while its financial strength rating was confirmed
at B-. Moody's also lowered to Aa3 from Aa2 the long-term
debt and deposit ratings of Credit Agricole Indosuez (CAI) and confirmed
its C financial strength rating. The Prime-1 short-term
debt ratings of the three institutions were confirmed. All ratings
now have a stable outlook.
Moody's said that its decision reflected its expectation that, after
having cleared all regulatory hurdles, Credit Agricole's tender
offer will come through successfully. The offer was officially
launched on March 28th 2003 following the Commission des Operations de
Bourse (COB)'s clearance, and will close on May 26th, after
a ruling from the French State Court has upheld the decision of the banking
regulators to approve the transaction. Although the results of
the tender offer should only be announced on June 6th, Moody's said
that it expects the transaction to be successfully completed and Credit
Agricole to gain a majority in Credit Lyonnais, in light of its
current 17.8% stake in the bank and the commitment from
Credit Lyonnais's group of core shareholders to tender their shares (representing
26.6% of the capital in total) to Credit Agricole.
Moody's commented that Credit Agricole's Aa2/B+ ratings reflect the
strengths of the banking group arising from the merger, including
its dominant domestic retail franchise, the enhanced depth and diversity
of its various business lines and the synergies expected from the combination.
At the same time, Credit Agricole's lower rating also considers
the material integration challenges and execution risks involved in the
combination and realignment of the two banks various activities,
given the size, complexity as well as different banking culture
and organization of the combined group.
Moody's also pointed to Credit Agricole's somewhat reduced financial flexibility
and to some capital dilution as the price paid for Credit Lyonnais -
largely in cash - incorporates significant goodwill, in spite
of the group's traditional strong internal capital generation capacity.
Credit Agricole's profitability indicators are also likely to reflect
the fact that synergies expected from the acquisition will filter through
to earnings only gradually, as they may be constrained by social
and operational rigidities.
The upgrade of Credit Lyonnais's long-term debt rating to Aa3 reflects
the benefit of its integration into a financially stronger organization
and related credit support. Similarly, CA Indosuez Aa3 rating
- also lowered from Aa2 - continues to be underpinned by
its status as one of Credit Agricole's key subsidiary. Moody's
noted that the transaction should have long-term positive implications
for both entities - as well as for Credit Agricole global financial
strength - by strengthening their fundamentals over the medium
term if the merger strategy is successfully implemented and if the synergies
opportunities which are envisaged do indeed come to fruition. In
particular, the combination of their wholesale banking activities
should achieve greater critical mass and earnings stability, while
reducing costs and total allocated capital. However, the
confirmation with a stable outlook of both CAI's and Credit Lyonnais's
financial strength ratings at C and B-, respectively,
reflects the fact that uncertainties exist with regard to the extent and
timing of the realization of the expected synergies, as well as
of potential changes in the legal and operational framework of the combined
group.
Finally, Moody's said that the stable outlook on Credit Agricole's
ratings reflected both the long-term strategic benefits resulting
from Credit Lyonnais's acquisition which somewhat temper the related execution
risks, and the fact it continues to view Credit Agricole as one
of the strongest providers of mass retail financial services in Europe.
The following ratings were lowered:
Credit Agricole S.A. - senior debt and long-term
bank deposit to Aa2 from Aa1, subordinated debt to Aa3 from Aa2,
financial strength to B+ from A-;
Credit Agricole Indosuez - senior debt and long-term bank
deposit to Aa3 from Aa2, subordinated debt to A1 from Aa3;
Indosuez Holdings S.C.A. - preferred stock
to A2 from A1;
Twenty Caisses Regionales de Credit Agricole - long-term
bank deposit to Aa2 from Aa1.
The following ratings were upgraded:
Credit Lyonnais S.A. - senior debt and long-term
bank deposit to Aa3 from A1, subordinated and junior subordinated
debt to A1 from A2;
Credit Lyonnais S.A., New York branch - senior
debt to Aa3 from A1 and subordinated debt rating to A1 from A2;
Credit Lyonnais Capital S.C.A. - preferred
stock guaranteed by Credit Lyonnais S.A. to A2 from A3;
Credit Lyonnais Finance (Guernsey) Ltd. - senior debt guaranteed
by Credit Lyonnais S.A. to Aa3 from A1, subordinated
and junior subordinated debt guaranteed by Credit Lyonnais S.A.
to A1 from A2;
Credit Lyonnais Financial Products (Guernsey) Ltd. - senior
debt guaranteed by Credit Lyonnais S.A. to Aa3 from A1,
subordinated and junior subordinated debt guaranteed by Credit Lyonnais
S.A. to A1 from A2.
The following ratings were confirmed:
Credit Agricole S.A. - short-term debt and
bank deposit at Prime-1;
Credit Agricole Indosuez - short-term bank deposit at Prime-1
and bank financial strength at C;
Indosuez North America - commercial paper guaranteed by Credit
Agricole Indosuez at Prime-1;
Twenty Caisses Regionales de Credit Agricole - short-term
bank deposit at Prime-1;
Credit Lyonnais S.A. - short-term debt and
bank deposit at Prime-1 and bank financial strength at B-;
Credit Lyonnais S.A., New York branch - short-term
debt at Prime-1;
Credit Lyonnais Finance (Guernsey) Ltd. - short-term
debt guaranteed by Credit Lyonnais S.A. at Prime-1;
Credit Lyonnais Financial Products (Guernsey) Ltd. - short-term
debt guaranteed by Credit Lyonnais S.A. at Prime-1;
Credit Lyonnais North America, Inc. - commercial paper
guaranteed by Credit Lyonnais S.A. at Prime-1.
Based in Paris, Credit Agricole S.A. is the central
entity of the Credit Agricole mutual banking group. At end-2002,
the group had total assets EUR 581 billion. Also headquartered
in Paris, Credit Lyonnais S.A. had consolidated assets
of EUR 245 billion at end-2002.
London
Samuel S. Theodore
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
44 20 7772 5454
Paris
Jean-Luc Lepreux
Senior Vice President
Financial Institutions Group
Moody's France S.A.
33 1 53 30 10 20
