Fitch Ratings has assigned Coface a Long-term Issuer Default Rating (IDR) of ‘A’. The Outlook is Stable. Fitch has also assigned Coface Holding a Short-term IDR of ‘F1’ and an expected ‘F1(EXP)’ short-term rating to the EUR250m commercial paper (CP) which the company expects to issue later in 2012.
Coface Holding’s ratings reflect those of its wholly-owned major operational entities, and mainly the key entity which is Coface S.A. (Insurer Financial Strength (IFS) rating: ‘AA-‘/Stable; IDR: ‘A+’ Stable), and whose ratings were affirmed on 03 May 2012 (see ‘Fitch Affirms Coface’s IFS at ‘AA-‘; Outlook Stable’ at www.fitchratings.com.)
Coface Holding’s Short-term IDR is directly derived from Coface’s Long-term IDR according to Fitch’s standard insurance methodology.
The CP’s ‘F1(EXP)’ Short-term debt rating, which is subject to receipt of final documentation not materially differing from the original documentation, is at the same level as Coface Holding’s Short-term IDR. The CP’s short-term debt rating also reflects the EUR250m liquidity back-up line to be provided by high credit quality banks including: Societe Generale (‘A+’/Negative), Credit Agricole (‘A+’/Negative), Natixis (‘A+’/Negative), HSBC (‘AA’/Negative) and Royal Bank of Scotland (‘A+’/Stable).
Fitch considers the issuance of EUR250m CP as consistent with Coface group’s plans to progressively reduce its funding reliance on Natixis, its ultimate owner.
Fitch expects financial leverage at Coface group level to remain low and in line with its current rating as it expects the CP issuance to replace financing previously provided by Natixis rather than to increase financial debt levels. At end-June 2012 financial leverage (excluding operating debt) was 1%, unchanged from end-2011.
Although unlikely in the short to medium term, factors that could trigger a rating upgrade include an upgrade of the ratings of the core insurance operating activities of the Coface group.
The ratings could be downgraded if Coface group’s credit quality deteriorated so that its combined ratio remained consistently above 100% or there was a material and sustained fall in its current capital levels.