Rating action

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.

Rating rationale

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.

Rating-change drivers

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

Methodology
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.
Information on the meaning of each rating category, including definitions of default and recoveries can be viewed in the “Rating Definitions - Credit Ratings and Ancillary Services” published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA. Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definitions of default and rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how Environmental, Social or Governance factors (ESG factor) are incorporated into the rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
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.
The following substantially material sources of information were used to prepare the credit rating: The rated entity, third parties and public domain.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
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.

Regulatory disclosures
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.

Potential conflicts
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings.  

Conditions of use / exclusion of liability
© 2020 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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