DBRS Confirms FFPP’s A (low) Senior Debt Rating, Trend Neg.

DBRS Ratings Limited (DBRS) has today confirmed the 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 the 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 that had been accumulated by the regional and local governments 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 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 26.6 billion syndicated bank loan from different Spanish Financial institutions 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 2013 this syndicated loan was partially converted into senior debt issued by the fund in the amount of EUR 16.2 billion with maturity dates of 2014/18 and partially cancelled and replaced by a loan from the State in the amount of EUR11.8 billion with maturity date of 2022.
In 2013 the FFPP was extended in two new phases. The Royal Decree-law 4/2013 on February 22, 2013 enlarged the Fund by 1.1 billion, which were funded through a new syndicated loan from different Spanish and foreign financial institutions with a 5-year term and a 2-year grace period. During the third phase, the Royal Decree-law 8/2013 on June 28, 2013 increased the size of the Fund by EUR 13.6 billion, which were funded by a loan from the State, different bilateral loans from different Spanish and foreign financial institutions and senior debt issued by the Fund.
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, which manages its funding and financial risks.

The last rating action on the Kingdom of Spain was taken on 11 April 2014, when DBRS confirmed its Long-Term Foreign and Local Currency ratings at A (low) and maintained the Negative trend.

Notes:
All figures are in Euros (EUR) unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations. Other methodologies used include the following: DBRS Criteria: Support Assessment for Banks and Banking Organisations and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities. These can be found on the DBRS website under Methodologies.

The sources of information used for this rating include company reports, SNL Financial and 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.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Rating Committee Chair: Roger Lister
Lead Analyst: Rui Croca
Initial Rating Date: February 25, 2013
Most Recent Rating Update: February 25, 2013

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