Milan, June 21, 2011 -- Moody's Investors Service has today placed the long-term ratings
of 23 Italy's sub-sovereigns -- comprising regions,
cities, provinces and government-related issuers --
and their senior unsecured debt obligations on review for possible downgrade.
RATIONALE FOR REVIEW
Today's actions were prompted by Moody's decision to place Italy's
Aa2 sovereign bond ratings on review for possible downgrade on 17 June
The main drivers that prompted the sovereign rating review are:
(i) economic growth challenges due to macroeconomic structural weaknesses
and a likely rise in interest rates over time; (ii) implementation
risks surrounding the fiscal consolidation plans that are required to
reduce Italy's stock of debt and keep it at affordable levels;
and (iii) risks posed by changing funding conditions for European sovereigns
with high levels of debt.
The ratings placed under review comprise two groups: (i) issuers
with ratings above the sovereign, for which we will assess their
capacity to withstand deteriorating systemic credit conditions,
and (ii) issuers with ratings at or near the sovereign level, for
which the credit quality is intertwined with that of the sovereign.
For the entities in the first group (Autonomous Province of Trento (Aaa),
Autonomous Province of Bolzano (Aaa) and Region of Lombardy (Aa1)),
the review will focus on the institutional factors that have allowed their
ratings to remain above that of the sovereign. For Trento and Bolzano,
this includes a unique constitutional status providing a degree of insulation
from macroeconomic and financial market factors impacting the sovereign.
In addition, these autonomous provinces display exceptionally strong
fiscal and debt metrics supporting their high ratings.
While Lombardy lacks the special constitutional status of the autonomous
provinces, it is the largest of the Italian regions representing
20% of national economic output. It has also maintained
very strong financial performance over the past several years illustrating
its institutional strength.
For issuers in the second group (see complete list below), our rating
actions recognize the financial and operational linkages between the state
and the regional and local governments (RLGs) in the country. In
Italy, the local public sector accounts for roughly 30% of
the country's general government expenditures and will be required
to contribute to the nation's efforts to reach fiscal consolidation
targets. Our review will focus on the extent that macroeconomic
and fiscal challenges facing the sovereign will translate into pressure
on the ratings of these RLGs.
Italian RLGs navigated the global crisis without significant fiscal deterioration
and many continue to record healthy fiscal outcomes. However,
Italian RLGs are not immune to the Sovereign credit condition and may
be exposed, to varying degrees, to the macroeconomic conditions
in the country.
Moody's has not changed the stable outlook on 12 additional RLGs
currently rated in the A1 -- Baa1 range. We continue to view
these ratings as appropriately positioned given their individual financial
characteristics and the challenges facing the sovereign.
- Autonomous Province of Trento's Aaa issuer rating
- Autonomous Province of Bolzano's Aaa issuer rating
- Region of Basilicata's Aa3 issuer rating
- Region of Emilia Romagna's Aa2 issuer and debt ratings
- Region of Liguria's Aa3 debt rating
- Region of Lombardy's Aa1 issuer and debt ratings
- Region of Marche's Aa3 debt rating, Aa2 senior secured
- Region of Sicily Aa2, senior secured debt rating
- Region of Tuscany's Aa2 issuer and debt ratings
- Region of Umbria's Aa3 issuer and debt ratings, Aa2
senior secured debt rating
- Region of Veneto's Aa2 issuer and debt ratings
- Province of Arezzo's Aa3 issuer rating
- Province of Bologna's Aa3 issuer rating
- Province of Florence's Aa3 issuer rating
- Province of Genoa's Aa3 issuer and debt ratings
- Province of Milan's Aa3 issuer and debt ratings
- Province of Turin's Aa3 issuer and debt ratings
- City of Bologna's Aa2 issuer rating
- City of Florence's Aa3 debt rating
- City of Milan's Aa3 issuer and debt ratings
- City of Siena's Aa2 issuer rating
- City of Venice's Aa3 issuer and debt ratings
- Cassa del Trentino SpA's Aaa issuer and debt ratings
- Finlombarda SpA's Aa2 issuer rating
The principal methodologies used in these ratings were "Regional
and Local Governments Outside the US", published in May 2008,
"The Application of Joint Default Analysis to Regional and Local
Governments", published in December 2008, and "Government-Related
Issuers: Methodology Update", published in July 2010.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last Credit Rating Action and the rating history.
Vice President - Senior Analyst
Moody's Italia S.r.l
MD - Sub-Sovereigns
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
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Moody's Italia S.r.l
Moody's reviews several Italian sub-sovereigns for possible downgrade following sovereign action
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