London, 29 May 2018 -- Moody's Public Sector Europe has today placed the ratings of 18 Italian
regional and local governments and two Government Related Issuers under
review for downgrade. At the same time Moody's has affirmed
the Ba2 ratings of the Region of Lazio with stable outlook.
The decision to place the ratings on review for a downgrade was prompted
by the corresponding action on Italy's government bond rating https://www.moodys.com/research/--PR_384025,
on May 25. Please also refer to the comment published by the sovereign
team http://www.moodys.com/viewresearchdoc.aspx?docid=PR_384385,
on May 29.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_199586
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
RATIONALE FOR PLACING 20 SUBSOVEREIGNS UNDER REVIEW FOR DOWNGRADE
Regional and Local Governments. Sovereign credit conditions drive
the ratings for the sector. Slow progress with national economic
and fiscal reforms pose risks for RLGs and outweigh recent successful
budgetary consolidation efforts.
Italian regional and local governments (RLGs) are enduringly linked with
the central government via close institutional, economic and financial
links. These links have strengthened in the course of the last
few years due to several changes in the institutional framework,
leading to higher supervision and greater control mechanisms exerted by
the sovereign.
Moody's notes that regions strongly rely on the Italian sovereign for
the funding of the healthcare sector, their main responsibility
which absorbs a very high portion of their budgets. The dependence
of Italian RLGs on sovereign transfers has been reinforced by stricter
limits on their financial autonomy. As a result, a weakening
in Italy's fiscal strength may lead to fiscal pressure for RLGs
over the medium term.
Furthermore all RLGs are largely dependent on the sovereign for their
borrowing needs for capital expenditures. As such their cost of
funding is largely reliant on sovereign credit conditions. The
Italian government already accounts for a large portion of regional and
local governments' existing debt and has been in practice the sole
lending provider in the last few years.
Government-Related Issuers. The decision to place the Baa2
rating for MM S.p.A. and the A3 rating for Cassa
del Trentino S.p.A under review for downgrade, follows
the corresponding decision on their respective owners (City of Milan Baa2/RUR-
and Autonomous Province of Trento A3/RUR-). From a credit-risk
perspective, there is no meaningful distinction between these two
entities and their respective owners because of the intrinsic operational
ties between the two.
The conclusion of the review on the sovereign bond rating will prompt
a conclusion of the review for the affected sub-sovereigns.
RATIONALE FOR AFFIRMING THE RATING OF THE REGION OF LAZIO WITH STABLE
OUTLOOK
The Ba2 ratings of the Region of Lazio have been affirmed. The
current positioning of the rating and the significant progress of the
region toward budgetary consolidation and debt stabilization can accommodate
further pressure potentially coming from the sovereign.
WHAT COULD CHANGE THE RATING DOWN IN THE CONTEXT OF THIS REVIEW
Moody's would consider downgrading some or all the ratings of the affected
sub-sovereigns in case of a sovereign rating downgrade, after
assessing the implications of the sovereign credit conditions and the
pressures exerted on their finances.
WHAT COULD LEAD TO CONFIRMATION OF THE RATING AT THE CURRENT LEVEL
Moody's will confirm all the ratings of the affected sub-sovereigns
in case of sovereign rating confirmation.
The sovereign action required the publication of these credit rating actions
on a date that deviates from the previously scheduled release date in
the sovereign release calendar, published on www.moodys.com.
The specific economic indicators, as required by EU regulation,
are not available. The following national economic indicators are
relevant to the sovereign rating, which was used as an input to
this credit rating action.
Sovereign Issuer: Italy, Government of
GDP per capita (PPP basis, US$): 36,877 (2016
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 0.9% (2016 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.5%
(2016 Actual)
Gen. Gov. Financial Balance/GDP: -2.5%
(2016 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 2.6% (2016 Actual) (also
known as External Balance)
External debt/GDP: [not available]
Level of economic development: High level of economic resilience
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On 25 May 2018, a rating committee was called to discuss the rating
of the Civitavecchia, City of; Lazio, Region of;
Milan, City of; Sicily, Autonomous Region of; Venice,
City of; Abruzzo, Region of; Basilicata, Region
of; Campania, Region of; Cassa del Trentino S.p.A.;
Liguria, Region of; Lombardy, Region of; MM S.p.A.;
Molise, Region of; Piedmont, Region of; Puglia,
Region of; Sardinia, Autonomous Region of; Trento,
Autonomous Province of; Umbria, Region of; Valle d'Aosta,
Autonomous Region of; Veneto, Region of; Bolzano,
Autonomous Province of. The main points raised during the discussion
were: The systemic risk in which the issuer operates has materially
increased.
The principal methodology used in rating Abruzzo, Region of,
Basilicata, Region of, Bolzano, Autonomous Province
of, Campania, Region of, Civitavecchia, City of,
Lazio, Region of, Liguria, Region of, Lombardy,
Region of, Milan, City of, Molise, Region of,
Piedmont, Region of, Puglia, Region of, Sardinia,
Autonomous Region of, Sicily, Autonomous Region of,
Trento, Autonomous Province of, Umbria, Region of,
Valle d'Aosta, Autonomous Region of, Veneto, Region
of, and Venice, City of was Regional and Local Governments
published in January 2018. The principal methodology used in rating
Cassa del Trentino S.p.A., and MM S.p.A.
was Government-Related Issuers published in August 2017.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_199586
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Lead Rating Analyst and Rating Office
• Releasing Office
• Person Approving the Credit Rating
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
The person who approved Cassa del Trentino S.p.A.,
and MM S.p.A. credit ratings is David Rubinoff,
MD - Sub Sovereigns, Sub-Sovereign Group, Journalists
Tel: 44 20 7772 5456, Client Service Tel: 44 20 7772
5454.
The person who approved Abruzzo, Region of, Basilicata,
Region of, Bolzano, Autonomous Province of, Campania,
Region of, Civitavecchia, City of, Lazio, Region
of, Liguria, Region of, Lombardy, Region of,
Milan, City of, Molise, Region of, Piedmont,
Region of, Puglia, Region of, Sardinia, Autonomous
Region of, Sicily, Autonomous Region of; Trento,
Autonomous Province of, Umbria, Region of, Valle d'Aosta,
Autonomous Region of, Veneto, Region of, and Venice,
City of credit ratings is Mauro Crisafulli, Associate, Managing
Director, Sub-Sovereign Group, Journalists Tel:
44 20 7772 5456, Client Service Tel: 44 20 7772 5454.
The relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the website.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Elise Savoye
Asst Vice President - Analyst
Sub Sovereign Group
Moody's Investors Service EMEA Limited France Branch
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Mauro Crisafulli
Associate Managing Director
Sub Sovereign Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service EMEA Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454