Scope affirms CDP’s issuer rating at BBB+ and revises the Outlook to Negative
Scope Ratings GmbH has today affirmed the BBB+ issuer rating of Cassa Depositi e Prestiti SpA (CDP) along with the BBB+ rating on its senior unsecured debt. The long-term rating Outlook has been changed to Negative (from Stable).
The S-2 short-term rating was affirmed with a Stable Outlook.
The rating action on CDP follows the recent revision by Scope Ratings of the Outlook on the Republic of Italy to Negative from Stable on 15 May. Italy’s long-term local- and foreign-currency issuer and senior unsecured debt ratings were affirmed at BBB+.
The ratings on CDP reflect the issuer’s unique business model as the Italian National Promotional Institution (NPI) and majority ownership by the Republic of Italy, which, in Scope’s view, would fully support CDP in case of need.
The strategic importance of CDP for policy action was again highlighted in the first half of 2020, when SACE, a subsidiary of CDP, was designated as the main vehicle to provide guarantees on business loans. As a result of the announced actions, Scope expects CDP’s balance sheet to expand in 2020. Balance sheet expansion during recessions is a typical feature for NPIs, which tend to operate countercyclically.
CDP’s market liabilities are not explicitly guaranteed by the Italian state – hence, the conditions for an automatic rating equalisation for debt are not met. However, it is highly probable that the Italian sovereign would support CDP in case of need, given the issuer’s strategic importance to the government, the lack of alternative players that could credibly perform CDP’s role and the severe implications that a default would have on Italy’s economy and public finances.
The ratings also acknowledge CDP’s strong standalone fundamentals, which are notable compared to those of other financial institutions in Italy. Reflecting its mission as the Italian NPI, CDP’s exposure to Italian public finance (governmental and local) is very material. Scope’s supplementary analysis highlights CDP’s low asset risk and portfolio of equity stakes to be a source of standalone strength for CDP as this provides a reliable flow of dividends, a useful source of revenue diversification into non-government-related activities.
Among key rating change drivers, Scope highlights that a change in the ratings on the Republic of Italy (in either direction) is likely to affect CDP’s ratings.
A material decrease in the level of expected support from the Republic of Italy coupled with a shift in CDP’s balance sheet towards riskier activities would negatively affect the ratings.
Rating driver references
1. 15 May 2020 Rating action on Italy
The methodology used for these ratings and rating outlooks (Rating Methodology Government Related Entities, dated 12 July 2019) is available on https://www.scoperatings.com/#!methodology/list.
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The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.
Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
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Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.
This credit rating and/or rating outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Marco Troiano, Executive Director
Person responsible for approval of the rating: Dierk Brandenburg, Managing Director
The ratings/outlooks were first released by Scope on 24 October 2017. The Short Term Rating and Outlook were first released by Scope on 1 February 2018. The ratings/outlooks were last updated on 17 December 2018.
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