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Rating Action:

MOODY'S REVIEWS FOR POSSIBLE DOWNGRADE THE Aa1/A- RATINGS OF CREDIT AGRICOLE; REVIEWS FOR POSSIBLE UPGRADE THE A1/B- RATINGS OF CREDIT LYONNAIS FOLLOWING ANNOUNCEMENT OF FRIENDLY TENDER OFFER

16 Dec 2002
MOODY'S REVIEWS FOR POSSIBLE DOWNGRADE THE Aa1/A- RATINGS OF CREDIT AGRICOLE; REVIEWS FOR POSSIBLE UPGRADE THE A1/B- RATINGS OF CREDIT LYONNAIS FOLLOWING ANNOUNCEMENT OF FRIENDLY TENDER OFFER

Approximately EUR73 Billion of Long-term Debts Are Affected.

Paris, December 16, 2002 -- Moody's Investors Service today placed on review for possible downgrade the Aa1 senior debt, Aa2 subordinated debt and A- financial strength ratings of Credit Agricole S.A. Moody's also placed on review for possible upgrade the A1 senior, A2 subordinated debt, A3 preferred stock and B- financial strength ratings of Credit Lyonnais and of its guaranteed subsidiaries. The Aa2 senior debt, Aa3 subordinated debt and A1 preferred stock ratings of Credit Agricole Indosuez were also placed on review for possible downgrade while the bank's C financial strength rating was confirmed. All short-term ratings were confirmed at Prime-1.

These rating actions follow Credit Agricole's announcement today of its friendly tender offer on Credit Lyonnais, with a view to acquire at least 50.01% of its capital. With a stake of around 17.8%, Credit Agricole S.A. is currently Credit Lyonnais's largest shareholder.

Moody's said that the ratings review will focus on:

(i) the benefits for the combined organization in terms of enhanced franchise, increased earnings diversity and cost synergies opportunities;

(ii) the likelihood for potential marginal dilution of Credit Agricole's financial fundamentals, this concern being seen in light of the negative outlook Moody's had before today's announcement on the bank's long-term ratings as well as the price offered for taking control of Credit Lyonnais;

(iii) the execution and integration risks arising from the banks' combination.

Moody's commented that, subject to the successful completion of the tender offer, the combination of Credit Agricole and Credit Lyonnais would create a group with dominant market shares in French retail banking. The combined group would also achieve enhanced competitive positions in other major business segments, notably in retail financial services, asset management and insurance. Although the new group intends to maintain the two brands and to operate separately the two banks' retail branch networks, the combination is expected to afford significant cost synergies in areas such as systems, administration and back offices, and risk management. Furthermore, the combination of Credit Agricole Indosuez and Credit Lyonnais's wholesale banking activities would allow the two banks to achieve greater critical mass in investment banking while aiming at reducing costs and total allocated capital, and achieving higher earnings stability and profitability. Finally, the new group could, in time, take advantage of its enhanced domestic position to play a more active role in the consolidation of the European banking industry.

Against these potential strengths, Moody's pointed to the impact that the transaction would have on Credit Agricole's financial profile, as the price offered for Credit Lyonnais - largely paid in cash - incorporates a very significant control premium and is only justifiable by the strategic long-term benefits expected from the acquisition. In addition, although Credit Lyonnais now boasts good profitability indicators, the combination would also somewhat alter Credit Agricole's efficiency and risk weighted profitability, while prospects for extracting merger-related benefits will be constrained by social and operational rigidities. Finally, Moody's also noted that the combined firm will face material integration issues, given the sheer size and complexity of the two groups, and their different banking culture and organization.

Despite the risks and challenges involved in this transaction, Moody's concluded the new group would enjoy strong credit strength, and any lowering of Credit Agricole long-term ratings, if warranted, should be limited. At the same time, the revised ratings of Credit Lyonnais and Credit Agricole Indosuez are expected to reflect their relative position and role within the new organization. Moody's said that it expects to conclude its review as the results of the tender offer are known, but pointed to its inherent uncertainties.

The following ratings were placed on review for possible downgrade:

Credit Agricole S.A. - senior debt and long-term bank deposit at Aa1, subordinated debt at Aa2, financial strength at A-;

Credit Agricole Indosuez - senior debt and long-term bank deposit at Aa2, junior debt at Aa3;

Indosuez Holdings S.C.A. - preferred stock at A1;

Nineteen Caisses Regionales de Credit Agricole rated by Moody's - long-term bank deposit at Aa1.

The following ratings were placed on review for possible upgrade:

Credit Lyonnais S.A. - senior debt and long-term bank deposit at A1, subordinated and junior subordinated debt at A2, and bank financial strength rating at B-;

Credit Lyonnais S.A., New York branch - senior debt at A1 and subordinated debt rating at A2;

Credit Lyonnais Capital S.C.A. - preferred stock guaranteed by Credit Lyonnais S.A. at A3;

Credit Lyonnais Finance (Guernsey) Ltd. - senior debt guaranteed by Credit Lyonnais S.A. at A1, subordinated and junior subordinated debt guaranteed by Credit Lyonnais S.A. at A2;

Credit Lyonnais Financial Products (Guernsey) Ltd. - senior debt guaranteed by Credit Lyonnais S.A. at A1, subordinated and junior subordinated debt guaranteed by Credit Lyonnais S.A. at 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;

Nineteen Caisses Regionales de Credit Agricole rated by Moody's - short-term bank deposit at Prime-1;

Credit Lyonnais S.A. - short-term debt and bank deposit at Prime-1;

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, the second largest European banking group by net assets. As of June 30th, 2002, the group had total assets EUR584 billion. Also headquartered in Paris, Credit Lyonnais S.A. is the seventh largest French bank by assets and had total footings of EUR243 billion at June-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

No Related Data.
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