Rating action

Scope Ratings GmbH (Scope) 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 Stable from Negative. The S-2 short-term rating has been affirmed with a Stable Outlook.

The rating action on CDP follows Scope’s recent revision of the Outlook on the Republic of Italy¹ to Stable from Negative on 20 August. Italy’s long-term local- and foreign-currency issuer and senior unsecured debt ratings were affirmed at BBB+.

Rating rationale

The ratings on CDP reflect the issuer’s role as Italy’s National Promotional Institution and its majority control and ownership by the Republic of Italy (rated BBB+, Stable Outlook).

Despite the absence of an explicit guarantee on all CDP’s liabilities, Scope deems the likelihood of exceptional support high, given the strategic importance of the institution for the state, the lack of credible alternative players for the same role and the severe implications a default would have for the Italian economy and public finances.

CDP was at the forefront of policy action amid the Covid-19 crisis in 2020. SACE, a subsidiary of CDP, was designated as the main vehicle for the provision of guarantees on business loans. Additionally, the institution provided approx. EUR 4bn of direct funding to support medium and large corporates’ liquidity needs, EUR 3bn of indirect funding to SMEs, and EUR 22bn in deferrals on public sector loans. The expansion of CDP’s balance sheet highlights the countercyclical nature of National Promotional Institutions’ role during recessions.

Along with its mission of supporting the economy through the direct and indirect financing of private enterprises and public administrations, starting in 2021 CDP operate as advisor and manager of the equity and debt initiatives within the ‘Patrimonio Rilancio’. This is a temporary and extraordinary instrument, which will mobilise up to EUR 44bn of public resources to support companies hit by the crisis.

The ratings also acknowledge CDP’s strong standalone fundamentals, which are notable when compared to other domestic financial institutions. Given CDP’s role as the Italian National Promotional Institution, its exposure to Italian public finance entities, both governmental and local, is material and reflects favourably on the institution’s asset quality.

The portfolio of equity stakes provides a reliable flow of dividends and represents a source of revenue diversification outside government-related activities.

Outlook - rating-change drivers

The Outlook is Stable reflecting the Outlook on the Republic of Italy’s rating.

A material change in the Republic of Italy’s credit fundamentals, as reflected by the sovereign rating, could move CDP’s rating in either direction.

A material decrease in the likelihood of external support from the Republic of Italy coupled with a shift in the balance sheet towards riskier activities would put downward pressure on the ratings.

Rating driver references
1. 20 August 2021 Rating action on Italy

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Rating Methodology: Government Related Entities, 5 May 2021), is available on https://www.scoperatings.com/#!methodology/list.
Scope Ratings GmbH and Scope Ratings UK Limited apply the same methodologies/models and key rating assumptions for their credit rating services, while Scope Hamburg GmbH’s methodologies/models and key rating assumptions are different from those of Scope Ratings GmbH and Scope Ratings UK Limited.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other 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 Credit Rating performance report at https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA. 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 Ratings’ definitions of default and Credit 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 factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Chiara Romano, Associate Director
Person responsible for approval of the Credit Ratings: Dierk Brandenburg, Managing Director
The issuer Credit Rating/Outlook was first released by Scope Ratings on 24 October 2017. The Credit Rating/Outlook was las updated on 22 May 2020.
The senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 24 October 2017. The Credit Rating/Outlook was las updated on 22 May 2020.
The short-term Credit Rating/Outlook was first released by Scope Ratings on 1 February 2018. The Credit Rating/Outlook was last updated on 22 May 2020.

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
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