MOODY'S REVIEWS FOR POSSIBLE UPGRADE THE Aa3 DEPOSIT AND SENIOR DEBT RATINGS OF CREDIOP OF ITALY FOLLOWING ANNOUNCEMENT OF PLANNED ACQUISITION OF CONTROL OF CREDIOP BY DEXIA GROUP; CONFIRMS THE RATINGS OF CREDIT LOCAL DE FRANCE (Aa1/Prime-1/B+) AND CREDIT
Moody's Investors Service placed under review for possible upgrade the Aa3 long-term deposit and senior debt ratings of Crediop, a leading lender to Italian local authorities and a subsidiary of the San Paolo-IMI Group of Italy, following the announcement that the Dexia Group has reached an agreement with San Paolo-IMI to acquire control of Crediop. Moody's also confirmed the ratings of the two main operating banks of the Dexia Group, Cr‚dit Local de France (Aa1/Prime-1/B+) and Cr‚dit Communal de Belgique (also Aa1/Prime-1/B+), and of their subsidiaries. Dexia has held a 40% stake in Crediop since 1997. The transaction should close in early 1999 and is subject to regulatory approval.
Crediop is a leading lender to Italian territorial communities with a 20% market share. Its Aa3/Prime-1/B ratings reflect its sound financial fundamentals, especially a low-risk loan portfolio, stable core earnings potential and strong levels of risk-adjusted capitalization. The bank's ratings also take account of the fact that, while the public sector finance market in Italy is expected to grow, deregulation has also made it increasingly competitive. Moody's said that the review will focus on Dexia's strategic plans for Crediop, as well as the structural and management changes that might be implemented to integrate the operations of the two banks.
In confirming the ratings of the Dexia Group's two main operating banks and their subsidiaries, Moody's commented that the acquisition is consistent with Dexia's strategy of expanding its public sector financing activities across Europe. The Dexia Group has a market share of territorial-community financing in Europe of about 15%. Regarding the increased stake in Crediop, although the goodwill is significant, the impact on the earnings profile of the Dexia Group should be limited, especially considering that it will not have 100% ownership. A 40% shareholding will be held by Italian partners, a factor which Moody's said it views as positive for the future commercial development of Crediop.
Nevertheless, in changing the rating outlook of the two main operating banks of the Dexia Group to negative, Moody's noted that the numerous acquisitions of the Dexia Group since 1997 have been weighing on the economic capitalization of both Cr‚dit Local de France and Cr‚dit Communal de Belgique. In addition, seamlessly integrating these various new entities within the Dexia Group represents a significant management challenge. Moody's added, in this respect, that in spite of the forthcoming EMU, public sector lending throughout Europe is likely to preserve strong national and regional characteristics for some time.
The following ratings were placed under review for possible upgrade:
Crediop SpA - long-term deposits and senior debt at Aa3 and subordinated debt at A1;
Crediop Overseas Bank Ltd. - long-term deposits and senior debt at Aa3 and subordinated debt at A1, under the guarantee of Crediop.
The following ratings were confirmed:
Cr‚dit Local de France S.A. - long-term deposits at Aa1, short-term deposits at Prime-1, senior debt at Aa1, subordinated debt at Aa2, backed senior debt at Aaa, commercial paper at Prime-1, bank financial strength rating at B+ and counterparty rating at Aa1;
Dexia Project & Public Finance International Bank S.A. (Dexint) - senior debt at Aa1 backed by a shareholder support agreement from Cr‚dit Local de France and Cr‚dit Communal de Belgique;
Dexia Municipal Bank plc - long-term deposits at Aa1 and short-term deposits at Prime-1, under the guarantee of Cr‚dit Local de France;
Dexia Kommunbank AB - long-term deposits at Aa1 and short-term deposits at Prime-1, under the guarantee of Cr‚dit Local de France;
CLF Finance Co. - senior unsecured MTN program at Aa1, under the guarantee of Cr‚dit Local de France;
Financement Local et R‚gional (Floral) - senior debt at Aa1;
Cr‚dit Communal de Belgique S.A. - long-term deposits at Aa1, short-term deposits at Prime-1, junior subordinated debt at Aa2 and bank financial strength rating at B+;
CREGEM Finance N.V. - senior debt at Aa1, subordinated debt at Aa2 and other short-term debt at Prime-1, under the guarantee of Cr‚dit Communal de Belgique;
CREGEM North America, Inc. - commercial paper at Prime-1, under the guarantee of Cr‚dit Communal de Belgique;
Banque Internationale … Luxembourg S.A. - long-term deposits at Aa2, short-term deposits at Prime-1, senior debt at Aa2, subordinated debt at Aa3, junior subordinated debt at Aa3, commercial paper at Prime-1, bank financial strength rating at B and counterparty rating at Aa2;
Crediop SpA - short-term deposits at Prime-1 and bank financial strength rating at B;
Crediop Overseas Bank Ltd. - short-term deposits at Prime-1, under the guarantee of Crediop.
Cr‚dit Local de France is headquartered in Paris, France. At end-December 1997, the institution had total consolidated assets of FRF573 billion (about US$96 billion). Cr‚dit Communal de Belgique is headquartered in Brussels, Belgium. At end-December 1997, the bank had total assets of BEF4,083 billion (approximately US$111 billion). Crediop is headquartered in Rome, Italy. At end-December 1997, the bank had total assets of Lit35.2 trillion (approximately US$20 billion).
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