DBRS Assigns A (low) Rating to Senior Debt Issued by FFPP, Trend Neg.

DBRS Inc. (DBRS) has today assigned a rating of A (low) with a Negative trend to the Senior Unsecured Debt issued by Fondo para la Financiación de los Pagos a Proveedores (FFPP or the Fund), and a Short-Term Instruments rating of R-1 (low), Stable Trend. The Senior Unsecured Debt is backed by the explicit, unconditional, irrevocable and direct guarantee from the Kingdom of Spain. Therefore, the ratings and trend are equalised with the Long-Term and Short-Term Foreign and Local Currency ratings of the Kingdom of Spain (the State).

The FFPP was set up by the Royal Decree-law 7/2012 on March 9, 2012 (the Decree) to provide a means to settle commercial arrears in the regional and local governments that had accumulated before December 31, 2011. In return, those entities that have chosen to participate have agreed upon terms and conditions for payments of principal and interest, which underpin the financial position of the FFPP. The FFPP has full recourse to the participation of these entities in the revenues of the State. The Fund is a special purpose vehicle, whose equity is funded under Spain’s General Budget, and the FFPP’s budget is approved every year under the General Budget Law. All liabilities of the FFPP are explicitly and directly guaranteed by the Kingdom of Spain for the purposes of granting loans to regional and local authorities. In 2012, the Fund obtained a EUR 27.3 billion syndicated bank loan with a 5-year term and a 2-year grace period. This loan facilitated payments to the municipalities and autonomous communities in three tranches and benefiting more than 135,450 suppliers.

In accordance with Article 4.3 of the Decree, the FFPP can refinance itself through capital markets. In this respect, the Fund has support from the Spanish Treasury, who manages its funding and financial risks.

The last rating action on the Kingdom of Spain was taken on 8 August 2012, when DBRS downgraded its Long-Term Foreign and Local Currency ratings to A (low) from A (high) and maintained the Negative trend.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations. Other methodologies used include the DBRS Criteria – Intrinsic and Support Assessments. Both can be found on the DBRS website under Methodologies.

The sources of information used for this rating include the DBRS rating of the Kingdom of Spain. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Rating Committee Chair: Alan G. Reid
Lead Analyst: Roger Lister
Initial Rating Date: 25 February 2013
Most Recent Rating Update: 25 February 2013

For additional information on this rating please refer to the linking document under Related Research.