June 7, 2017 / 1:46 PM / a year ago

Fitch Affirms SEMAPA at 'AA-'; Outlook Stable

(The following statement was released by the rating agency) PARIS, June 07 (Fitch) Fitch Ratings has affirmed SEMAPA's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'AA-' with a Stable Outlook, and Short-Term Foreign Currency IDR at 'F1+'. Fitch has also affirmed SEMAPA's EUR340 million euro medium-term programme (EMTN) at 'AA-'/'F1+' and the company's EUR250 million French commercial paper (Titres de creances negociables; TCNs) programme at 'F1+' KEY RATING DRIVERS Fitch classifies SEMAPA as a credit-linked entity under its public-sector entities rating criteria, due to tight control by and strong support from its 92% owner and public sponsor, the City of Paris (AA/Stable/F1+). Despite its large development projects and part of its debt being guaranteed by the City of Paris, SEMAPA is rated one notch below its sponsor. This is because we do not view SEMAPA as a priority for the City of Paris in times of financial distress, at least for the non-guaranteed debt. The Outlook on SEMAPA reflects that on the city. As a developer, SEMAPA's role is to design, plan and realise urban projects. SEMAPA's developer activity implies financing equipment and works before cashing the revenue of building rights or contributions determined through the conventions a few years later. As a public limited company (SPLA), SEMAPA can only be owned by local authorities. The city exercises strong administrative, legal and financial oversight over SEMAPA, in the same way it oversees its own departments. Fitch believes this should help keep SEMAPA's budget in check and to anticipate potential cash flow problems. SEMAPA's long-term debt (EUR300 million at end-2016) is not consolidated with Paris's accounts, but the city guarantees EUR224 million of SEMAPA's debt. In response to SEMAPA's increasing financial requirements, the City of Paris has decided to increase the total amount of its guarantee on SEMAPA's borrowing, up to EUR456 million, representing 80% of SEMAPA's total debt (EUR570 million) raised for the "Paris Rive Gauche" (PRG) project. PRG is the most important urban project in Ile-de-France region for which SEMAPA is the urban developer. SEMAPA can only operate within the mandates its shareholders assign to it, and in accordance with the law, it is only allowed to develop on territory that belongs to its shareholders. SEMAPA will be entrusted with new development projects assigned by the City of Paris, representing a 30% increase in its programme workload in the medium term. To this end, SEMAPA will modify its legal status in 2017 to extend its activity throughout the entire territory of Paris. Its current activity is mainly concentrated on the PRG project, which represents 90% of SEMAPA's total revenue. Fitch views SEMAPA's business risk as limited given that the financial risk of the company's activities is mostly borne by the City of Paris, which means the city is ultimately responsible for SEMAPA's rights and obligations at the end of each project. In case of modifications to a project or extension of the date of expiry (at was the case for the PRG project in 2015), Paris's financial contribution is adjusted to balance the project's budget. At end-2016, all operations managed by SEMAPA continued to post a balanced result. Due to limited equity (EUR7.9 million at end-2016) relative to the size of the operations, SEMAPA is forced to rely on external financing. Fitch expects financial needs to peak at EUR385.8 million in 2018, from an expected EUR322.4 million in 2017 (without taking into account new operations that may be entrusted to SEMAPA). To cover its financing needs, in addition to bank loans, SEMAPA benefits from diversified funding instruments with an EMTN programme with a ceiling of EUR340 million (of which 80% can be guaranteed by Paris), issue of NSV's bonds (Namensschuldverschreibung; German registered bonds) and a EUR250 million French commercial paper programme. This diversification reduces the risk of refinancing in the medium term. SEMAPA will also benefit from the sponsor's reputation on debt capital markets. RATING SENSITIVITIES A rating action on the City of Paris would be reflected in SEMAPA's ratings. Changes indicating a weakening of the city's control and financial support to SEMAPA could have a negative impact on its ratings. Contact: Primary Analyst Arnaud Dura Director +33 1 44 29 91 79 Fitch France S.A.S. 60, rue de Monceau 75008 Paris Secondary Analyst Christophe Parisot Managing Director +33 1 44 29 91 34 Committee Chairperson Guido Bach Senior Director +49 69 768076 111 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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