Fitch Affirms Region of Umbria's Credit-linked Notes at 'BBB+' on Sovereign Action
The notes were issued on 21 November 2002 by the Region of Umbria in anticipation of funds to be provided by the Italian government for reconstruction following the 1997 earthquake in the region. These contributions (the payments) from the State have been agreed under Laws 488 of 23 December 1999 and 448 of 28 December 2001 and are distributed until 31 December 2018 under a pre-set schedule.
KEY RATING DRIVERS
Due to the irrevocable payment delegation issued under the Italian Civil Code by the Region of Umbria to the Italian Department for Civil Protection (the department), a division of the central government of the Republic of Italy, and following its acceptance by the department, the latter is legally bound to make these payments (which are equivalent to the scheduled issuer's two semi-annual instalments due on 30 June and 31 December of each year, until maturity) directly to the trustee (set up under a trust deed between the issuer and JP Morgan Chase Bank - London Branch) for the benefit of the noteholders.
Following the payment delegation, which cannot be revoked by either the region or by the department once accepted by the department, the right to receive the payments has effectively been transferred from the region to the trustee for the benefit of the noteholders, and the payment obligations by the department constitute claims of the noteholders against the Republic of Italy. Therefore, payment obligations of the department constitute unsecured obligations of the Republic of Italy, ranking equally with all its other unsecured financial obligations.
If the department fails to make any payments, the trustee, on behalf of the noteholders, will be entitled to enforce payments against the Region of Umbria acting as a back-up obligor.
The ratings of the notes are sensitive to changes in the ratings of the Italian sovereign.
On 23 October 2015, Fitch affirmed Italy's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB+', with Stable Outlook (see 'Fitch Affirms Italy at 'BBB+', Outlook Stable, on www.fitchratings.com).