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Global Credit Research - 16 Mar 2011
Madrid, March 16, 2011 -- Moody's Investors Service has today downgraded to Aa2 from Aa1 the
long-term ratings of (i) Administrador de Infrastructuras Ferroviarias
(Adif), (ii) Corporacion de Reservas Estrategicas (CORES) and (iii)
Sociedad Estatal de Participaciones Industriales (SEPI). Concurrently,
Moody's has affirmed the Prime-1 short-term rating
of Adif, which was not under review.
Today's rating actions follow Moody's recent rating downgrade
to Aa2 from Aa1 of the ratings of the Kingdom of Spain. All ratings
have a negative outlook, in line with the ratings of the Kingdom
The rating actions conclude the review for possible downgrade of these
entities, which Moody's initiated on 15 December 2010,
coinciding with the review of the sovereign ratings.
In addition, the sovereign downgrade has not affected the A2 senior
unsecured ratings with a negative outlook of Red Electrica de España
SAU (REE) and the guaranteed debt of its affiliates. This is because
REE's current ratings do not benefit from any direct uplift from
governmental support as a result of SEPI's 20% ownership
of the company.
"These rating downgrades follow Moody's downgrade to Aa2 from
Aa1 of the long-term ratings of the Kingdom of Spain, which
was prompted by: (i) ongoing uncertainties over the eventual cost
of bank restructuring despite the government's recent announcements
on higher capital requirements for Spanish financial institutions;
and (ii) ongoing concerns regarding the ability of the Spanish government
to achieve the required sustainable and structural improvement in general
government finances, given the limits of central government control
over the finances of regional governments," says Carlos Winzer,
a Moody's Senior Vice President and lead analyst for Adif,
CORES and SEPI.
Moody's decision to assign negative outlooks to the ratings follows
its assignment of a negative outlook to the ratings of the Kingdom of
Spain and reflects its view that risks remain regarding the Spanish government's
finances. Spain's country ceilings for bonds and bank deposits
are unaffected and remain at Aaa (in line with the Eurozone's rating).
In Moody's view, these three Spanish government-related
issuers (GRIs) are suited to a par rating with the government; indeed,
they have benefited from the sovereign's rating in the past and
continue to do so due to their special status, conferring the strategic
importance of their role. However, Moody's cautions
that Adif, CORES and SEPI do not enjoy any explicit guarantees from
the Spanish government, and that any indication of a change in the
Kingdom of Spain's (i) willingness to intervene in a timely manner
to support these GRIs in the event of need; and/or (ii) propensity
to support or encourage a more selective approach thereby differentiating
the rank order of support needs among all potential calls on the government
funding, could introduce a degree of notching in the GRI ratings
vs. the sovereign ratings.
All of the above companies are GRIs, which have a very strong element
of government support incorporated within their ratings in accordance
with Moody's rating methodology for such entities. This is
because the ratings of Adif, CORES and SEPI are based on these entities'
legal characteristics including their bylaws and/or their public law nature,
as well as Moody's assumption that these entities will remain key
instruments for the Spanish government's public sector management
and strategic oil reserves policy.
In the case of CORES and SEPI, Moody's applies credit substitution,
supported by the companies' particular funding and business models.
Therefore, for CORES and SEPI, the rating agency does not
publish a granular analysis of typical GRI factors, i.e.
support and dependence in addition to the baseline credit assessment (BCA)
and sovereign rating.
In the case of Adif, Moody's assigns a very high level of
support and dependence. The rating agency has lowered Adif's
BCA to 7 (on a scale from 1 to 21, where 1 represents the lowest
level credit risk and 21 the highest). This reflects the expected
increasing funding needs of the company as a result of a programme of
substantial investments in the high-speed railroad network approved
by the government. In Moody's view, the new BCA level
better positions Adif compared with its European railroad network operator
For additional information on rating factors, please refer to the
individual issuer credit opinions, available on www.moodys.com.
Moody's last rating action on Adif, CORES, and SEPI
was implemented on 15 December 2010, when the rating agency placed
the ratings of the three companies on review for possible downgrade following
the review of the ratings of the Kingdom of Spain.
The principal methodology used in this rating was Government-Related
Issuers: Methodology Update published in July 2010.
REE, based in Madrid, Spain, is the owner and operator
of the country's electricity transmission system and network.
As of 31 December 2010, the Red Electrica Group had consolidated
revenues of EUR1.4 billion.
Headquartered in Madrid, Spain, Adif enjoys special legal
status as an Entidad Pública Empresarial, reflecting its
100% state ownership and critical importance as a major part of
the country's transport infrastructure. Adif exhibits a strong
business risk profile, primarily derived from its natural monopoly
position as the national railway infrastructure manager. It is
responsible for: (i) owning and managing Spain's railway infrastructure,
including tracks, stations, and freight terminals, on
behalf of the government; (ii) managing rail traffic; (iii)
distributing capacity to rail operators; and (iv) collecting fees
for infrastructure, station and freight terminal use.
Madrid-based CORES is the organisation responsible for managing
the strategic oil reserves and controlling compulsory reserves (petroleum
products and natural gas) in Spain. By law, all companies
authorised to distribute oil products in Spain -- both operators
and importers -- must be members of CORES and pay it monthly
fees or risk losing their licence.
Headquartered in Madrid, SEPI is a public law entity that holds
equity stakes in companies in various industries in Spain including real
state, aerospace, shipping, engineering, and finance.
The entity was created as per Royal Decree 5/1995 under the public law
bylaws in Spain. It is ascribed to the Ministry of Economy and
its purpose is to: (i) maximise the return of its equity holdings;
(ii) determine a strategy to maximise the value of its portfolio;
(iii) manage and minimise the debt held by the former INI; and (iv)
supervise and manage a conglomerate of publicly owned companies in strategic
sectors or in non-competitive industrial sectors under certain
EU directives. These directives enable governments to intervene
in the restructuring of certain activities that might be considered obsolete.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
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three years preceding the Credit Rating Action. Please see the
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Moody's adopts all necessary measures so that the information it uses
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independent third-party sources. However, Moody's
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Please see ratings tab on the issuer/entity page on Moodys.com
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The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Senior Vice President
Corporate Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paloma San Valentin
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Espana, S.A.
Moody's downgrades Adif, CORES and SEPI to Aa2 (Spain)
Barbara de Braganza, 2
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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