NOTE: On September 28, 2020, the press release was corrected as follows: In the ninth paragraph of the Regulatory Disclosures section, the contact number for Client Services was added. Revised release follows.
Paris, July 03, 2020 -- Moody's Investors Service ("Moody's") has today
changed Ile-de-France Mobilités' (IdFM) and
Régie Autonome des Transports Parisiens' (RATP) outlooks
to negative from stable. At the same time, IdFM's Aa2
long-term issuer and senior unsecured ratings and its (P)Aa2 Euro
Medium Term Note (EMTN) programme ratings as well as its Prime-1
short-term issuer ratings and Prime-1 Negotiable European
Commercial Paper (NEU-CP) programme ratings have been affirmed.
RATP's Aa2 senior unsecured ratings, (P)Aa2 long-term
EMTN's rating, Prime-1 NEU-CP programme rating
have also been affirmed. IdFM's and RATP's baseline
credit assessments (BCAs) have been downgraded to a1 from aa3 and a2 from
"The negative outlooks reflect the significant negative pressures
on the funding model of public transportation in the Ile-de-France
area, resulting from the coronavirus pandemic, leading to
unprecedented decreases in passenger revenues and tax revenues"
says Matthieu Collette, Vice President -- Senior Analyst at
Moody's and lead analyst for IdFM and RATP. "The shock will
test IdFM's and RATP's capacity to adjust to a potentially
prolonged period of depressed ridership and may challenge established
support mechanisms from the French government."
The coronavirus outbreak is creating a severe and extensive credit shock
across many sectors, regions and markets. Moody's regards
the coronavirus outbreak as a social risk under its ESG (Environmental,
Social, Governance) framework, given the substantial implications
for public health and safety. IdFM and RATP are highly exposed
to the economic and social impacts of the coronavirus outbreak,
as containment measures cut demand for mass transit considerably in the
short term and as potential medium to long-term behavioural shifts
may prevent a return to pre-shock trends.
The affirmation of the ratings reflects underlying credit strengths for
IdFM and RATP which are likely to be resilient to this shock, including
the key role that they play in a high-income region with robust
growth potential, strong liquidity and for IdFM some budgetary flexibility.
RATIONALE FOR THE NEGATIVE OUTLOOKS AND THE DOWNGRADE OF THE BCAs
The negative outlooks for IdFM and RATP reflect the impact of the coronavirus
crisis on transport system utilization as well as on the regional economy.
In our baseline scenario, passenger revenues -- that accounted
for 38% of the funding of public transportation in the Ile-de-France
area in 2018 -- will suffer a contraction of around 30% in
2020 compared to 2019. With tight containment measures in place
during the two-month lockdown (from mid-March to mid-May),
passenger numbers on the Ile-de-France's network were
down 90%-95% while the network has been running around
30% of its capacity. Although passenger numbers are increasing
slowly as some parts of the economy re-open, a return to
normal capacity utilization is unlikely in the next few months and Moody's
expects supply to still exceed ridership until at least the end of 2020.
Even if the pandemic eases later this year, willingness and capacity
to travel, and with them passenger revenues, are likely to
be impaired for some time. While the shock materializes differently
for the two entities, it will ultimately have similar impacts on
their credit profiles, given their close interconnection and common
challenge posed to the funding model of their core businesses, public
For IdFM, the revenue loss mainly stems from lower tax revenues.
In 2018, about three quarters of IdFM's operating revenues,
and 44% of total revenues, came from tax revenues --nearly
all of it from the mobility tax, based on the regional salary base.
Moody's estimates that IdFM's tax revenues will decrease by
8.5% in its baseline scenario for 2020 compared to 2019,
due to the loss in economic activity. In line with Moody's
expectation that the economic recovery will be long and bumpy, mobility
tax proceeds will not recover their pre-level crisis before 2022.
For RATP, the immediate revenue loss will be buffered by the established
risk-sharing mechanism that caps the fare revenue loss at 10%
of budgeted amounts. Over time, the long-lasting depressing
impact of the shock on utilization rates may challenge this existing mechanism.
Moreover, compared to pre-crisis expectations of steady increases
in revenue, RATP faces a persistent revenue shortfall.
Overall, IdFM's and RATP's operating margins would drastically
decrease at least in 2020 and debt ratios to revenues would increase more
rapidly than previously anticipated.
Moody's notes that the Government of France (Aa2 stable) is currently
preparing a financial support package for IdFM with the third amended-financing
law for 2020 and that a partial compensation for mobility tax losses --
a €425 million advance payment, based on the 2017-2019
average of proceeds -- is being discussed in Parliament in the coming
weeks, in line with what the central government has designed for
other local governments responsible for public transportation.
Moody's expects that the discussions related to passenger revenues
losses and the underlying contracts between IdFM and the state-owned
operators, RATP and SNCF S.A. (Aa3 stable),
will continue. At this stage, the overall costs and allocation
of losses between different stakeholders, including IdFM and RATP,
has not been outlined. Moody's will continue to monitor any
new material development, including a potential fourth-amended
financing law for 2020 and the 2021 financing law.
These negative pressures on IdFM's and RATP's credit profiles are
also reflected in the downgrade of their respective baseline credit assessments
(BCAs) to a1 from aa3 and to a2 from a1. IdFM's final rating
incorporates a two-notch uplift based on Moody's assessment of
a high likelihood of support from the French government, as per
the application of Moody's Joint Default Analysis (JDA). RATP's
final rating benefits from a three-notch uplift based on Moody's
assessment of a very high likelihood of support from the sovereign.
RATIONALE FOR THE AFFIRMATION OF RATINGS
The affirmation of IdFM's and RATP's ratings reflects ongoing
credit strengths. Paris and the Ile-de-France area
retain a central role both nationally and at the European level.
With 10 million daily users, IdFM, as the entity that organises
transportation in the capital region, and RATP, as the main
operator and the fifth-largest urban transport operator in the
world, play a key role in the national economy. This role
is exemplified by the continuity of public transportation during the coronavirus
The two entities also benefit from the strong regional economy and supportive
demographics. The Ile-de-France area represent 30%
of national GDP or 4% of the GDP of the European Union, a
larger share than for Greater London (United Kingdom) or Lombardy (Italy).
GDP per capita is high, at 1.7x the national average as of
year-end 2018. With 12.2 million inhabitants,
Ile-de-France also has 19% of France's metropolitan
population, which is younger than the national average. Other
socio-economic indicators of the region such as employment,
median income or company creation are also well above the national averages,
providing resilience to the ratings.
The ratings also take into account the fact that, as the local authority
organizing and managing public transportation in the Ile-de-France
area, IdFM has some room of maneuver, including potential
increases in tariffs and adjustments on capital expenditures. By
contrast, relatively high fixed costs (including maintenance requirements
and large staffing of state-owned operators) make cut to operating
expenditure difficult to implement in the short run.
Liquidity is also a support to the ratings. While, in the
short-run, the shock has led IdFM and RATP to rely more heavily
on short-term debt -- as of mid-June, IdFM's
and RATP's outstanding NEU-CP amount were respectively €405
million and €2.7 billion -- the two entities benefit
from very strong access to short-term funding, including
access to the ECB's Pandemic Asset Purchase Programme and committed
credit lines from highly rated French banks, as well as to long-term
funding, including a €6 billion Euro Medium Term Note (EMTN)
programme for RATP and a €5 billion EMTN programme and access to
European Investment Bank (Aaa stable) funding for IdFM.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS FOR IdFM
In Moody's assessment, environmental risks are not material
to IdFM's credit profile. Like many regional and local governments
in France, IdFM is exposed to flooding. Extreme flooding
can disrupt transit services and damage transportation infrastructure.
IdFM would also be affected by heatwaves, as extreme heat affects
train tracks and services could be disrupted. These risks are mitigated
by IdFM's operator contracts, if services are disrupted,
IdFM will decrease consequently its contributions to its operators.
Social considerations are material to IdFM's credit profile. Ridership
is strongly correlated with the health of the Ile-de-France
area's economy and demographic trends, including population growth.
Moody's also regards the coronavirus outbreak as a social risk under its
ESG framework. For IdFM, passenger demand is impacted by
the epidemic and the measures that have been implemented to respond to
Governance considerations are material to IdFM's rating.
As for other French regional and local governments, standards of
governance and management are high as well as data transparency is.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS FOR RATP
In Moody's view, environmental risks are not material to RATP's
credit profile. While RATP is exposed to environmental risks that
might disrupt services, such as flooding or extreme heat,
these risks are not material for the rating as it is 100%-state
owned. In line with other advanced economies, environmental
risks for France's credit profile are low despite the multiplication of
extreme climatic events over the past several years.
Social considerations are material to RATP's credit profile as Moody's
regards the coronavirus outbreak as a social risk under its ESG framework.
For RATP, passenger demand is impacted by the epidemic and represent
a challenge for the funding model of public transportation in the Ile-de-France
Governance considerations are material to RATP's rating.
The governance framework is intrinsically intertwined with the supporting
government, which exerts strong oversight and ultimately takes key
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upgrades of IdFM's and RATP's ratings are unlikely in the
near term considering the negative outlooks.
The outlooks could be stabilized if IdFM and/ or RATP would succeed in
implementing measures that strengthened their financial position even
in an environment of ridership remaining below pre-crisis trends
for some time. Further significant and sustained financial support
from the central government could also lead Moody's to return the
outlooks to stable if it indicated that IdFM and/ or RATP would be likely
to be able to maintain their financials, including operating margins
and debt metrics, consistent with their current Aa2 ratings.
Downward pressure on the ratings could result from increasing evidence
that support measures from the central government and/or either entities'
adjustment measures will only partially offset a persistent revenue shortfall
in the medium term, likely leading to eroded operating margins and
to a higher debt burden.
The principal methodologies used in rating Regie Autonome des Transports
Parisiens were Mass Transit Enterprises Methodology published in December
2017 and available at available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1105431,
and Government-Related Issuers Methodology published in February
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207.
The principal methodology used in rating Ile-de-France Mobilites
was Regional and Local Governments published in January 2018 and available
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The person who approved Ile-de-France Mobilites credit ratings is Marie Diron, Managing Director -Sovereign/Sub Sovereign, Sovereign/Sub Sovereign, +44-20-7772-5456, +44-20 7772-5454. The person who approved Regie Autonome des Transports Parisiens credit ratings is Mauro Crisafulli,, Associate Managing Director- Sovereign/Sub Sovereign, Sub Sovereign, +44-20-7772-5456, +44-20 7772-5454.
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
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
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