London, 17 May 2012 -- Moody's Investors Service has today downgraded the standalone bank
financial strength (BFSR) of Caisse Centrale du Crédit Immobilier
de France (3CIF) to E/caa1, outlook developing, from C/a3
on review for downgrade. The rating agency is maintaining the review
for downgrade initiated on 15 February 2012 on 3CIF's long-
and short-term debt and deposit ratings of A1 and P-1,
respectively.
The long-term ratings now incorporate 12 notches of systemic support
(previously two notches), based on the rating agency's view
that the French public sector is highly likely to provide both financial
support over the short- to medium-term and assistance in
orchestrating a longer-term adaptation of 3CIF's business
model, which is currently unviable. Should such support not
be forthcoming promptly, or should attempts to achieve a longer-term
solution fail, Moody's would expect 3CIF's long-term
debt rating to transition down close to Caa1 (the standalone financial
strength rating implied by 3CIF's BFSR).
RATINGS RATIONALE
Moody's decision to downgrade 3CIF's BFSR to E/caa1 from C/a3
is based on the rating agency's assessment that the bank is no longer
viable without ongoing financial support and ultimately a more durable
solution. While 3CIF's interest margin and asset base have
shown some resilience throughout the recent crisis, its business
is entirely wholesale-funded, thus making it vulnerable to
debt market disruptions and to loss of investor confidence. The
firm currently has very limited access to private-sector financing,
and the rating agency sees no prospect of that changing in the foreseeable
future. Moody's notes that the trading of securities issued
by 3CIF and CIF Euromortgage was suspended on 8 May 2012 at the request
of the French and Luxemburg regulators, the Autorité des
Marchés Financiers and the Commission de Surveillance du Secteur
Financier.
The rating agency notes that the group has a policy of maintaining a liquidity
buffer equivalent to at least six months of financing needs. This
should leave the group with sufficient liquidity to meet maturing debt
obligations for several months. However, given recent developments,
Moody's believes that there is a high risk that this liquidity buffer
will erode steadily over that period. These significant liquidity
risks imply that the group is likely to become wholly reliant on liquidity
support from the French public sector, and ultimately to require
some form of more permanent solution, which would likely involve
a merger, strategic investment, or other joint venture with
a third party facilitated by the government. Moody's believes
that the group's adjusted BFSR/standalone credit assessment at E/caa1
reflects this risk. The developing outlook reflects the uncertainty
surrounding the strategy of the bank and the authorities' plan to
address the weakness in the bank's funding profile, as well
as the potential for the group's financial strength to be materially
improved, if a credible strategy were to emerge.
At the same time, Moody's has raised its assumptions of systemic
support to reflect its view that the French public sector is highly likely
to provide liquidity assistance over the short- to medium-term
if required by 3CIF, in order to allow time for a longer-term
solution to be identified and implemented. Moody's also considers
it likely that the French public sector will provide assistance in orchestrating
a longer-term adaptation of 3CIF's business model.
The rating agency's expectation of a strong willingness on the part
of the government to support 3CIF reflects the importance of the bank's
lending activities to the French housing market, especially in assisting
less privileged households, and the broader implications of further
disruptions in 3CIF's operations. A further factor underpinning
Moody's assumption of government support is 3CIF's public
sector ownership via the 56 "sociétés anonymes coopératives
d'intérêt collectif pour l'accession à
la propriété" (SACICAPs), which are social housing
companies that operate under private law with a locally-anchored
and diversified ownership, spread across "colleges"
including social housing associations ("organismes HLM") and
local governments ("collectivités territoriales").
As a result of the above considerations, the A1 long-term
debt and deposit ratings now incorporate an unusually large number of
rating notches (12) above the group's standalone financial strength.
The group's long-term ratings remain on review for downgrade
to allow Moody's to assess the prospects for a longer-term
solution that would bolster 3CIF's franchise and strengthen its
funding structure. The rating agency does not believe that public
support will be open-ended, and would expect the long term
ratings to converge towards Caa1 (the standalone financial strength rating
implied by 3CIF's BFSR) should the likelihood increase that a longer-term
solution to 3CIF's problems will not emerge.
Moody's has maintained its review for downgrade on the Prime-1
short-term rating. The P-1 rating reflects the high
degree of support the rating agency expects to be made available to 3CIF
to maintain a strong ability to repay its short-term obligations.
However, Moody's has decided to maintain the short-term
rating on review for downgrade while this support remains subject to uncertainty.
In line with the continuing review on the long-term debt ratings,
Moody's has not changed the (P)A2 subordinated debt and the (P)A3
junior subordinated debt programme's provisional ratings on review
for downgrade. However, as there is no subordinated and junior
subordinated debt outstanding, Moody's has subsequently withdrawn
the programme ratings for its own business reasons. Please refer
to the Moody's Investors Service's Policy for the Withdrawal
of Credit Ratings, available on its website, www.moodys.com.
WHAT COULD CHANGE THE RATINGS UP / DOWN
Moody's could upgrade 3CIF's BFSR in the event of a material
and sustained improvement in funding conditions for the group.
Moreover, further comprehensive support, most likely in the
form of a strategic transaction involving a business partner of strong
credit standing, could result in a confirmation of the debt and
deposit ratings.
Conversely, Moody's could downgrade 3CIF's debt and
deposit ratings in the event of a further deterioration of the group's
funding position, in the absence of an improvement in the bank's
financing prospects or a rapid materialisation of external support.
These considerations are reflected in the rating agency's decision
to continue its review for downgrade of 3CIF's debt and deposit
ratings and to assign a developing outlook to its BFSR.
The methodologies used in these ratings were Bank Financial Strength Ratings:
Global Methodology published in February 2007, and Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: Global
Methodology published in March 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
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information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
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the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Guillaume Lucien-Baugas
Analyst
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
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Carola Schuler
MD - Banking
Financial Institutions Group
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Moody's downgrades 3CIF's standalone financial strength to E; maintains review for downgrade on debt and deposit ratings
