Fitch: No Rating Impact from COFACE Ceasing to Provide Export Credit Guarantees and Insurances
OREANDA-NEWS. Fitch Ratings says that there is no rating impact from amendments to the legislative texts governing the guarantee or insurance provided by the French state in relation to export activities of French businesses, which to date have been issued by Compagnie Francaise d'Assurance pour le Commerce Exterieur (COFACE).
By 31 December 2016 at the latest, export credit insurances or guarantees that have previously been issued by COFACE in its own name but for the account and with the guarantee of the French state, will be issued directly by the Minister for the Economy, based on recommendations of the commission for guarantees and credits in relation to external trade (Commission des Guaranties et du Credit au Commerce Exterieur). This change has been approved by the French National Assembly and published in the French official journal on 29 December 2015.
The change does not affect Fitch's risk assessment of loans backed by French export credit insurances or guarantees, as outlined in the agency's Asset Analysis Criteria for Covered Bonds and CDOs of European Public Entities, dated 20 January 2016 at www.fitchratings.com. In its analysis, Fitch typically links such guaranteed or insured exposures to the ultimate guarantor (ie the sovereign) whose guarantee or insurance is provided. Fitch understands that the amendment to the French legislation could render such French state-guaranteed or insured loans eligible for inclusion as cover assets securing public sector covered bonds issued by German Pfandbriefbanks.
All existing export-credit guarantee and insurance agreements entered into and held by COFACE for the account of the state will be transferred directly to the state and managed (under the control of, for the account of and in the name of the French state) by an entity to be appointed. As per the new legislation, the transfer will not have any effect on the rights and obligations arising under the agreements and will not trigger the right to any modification, cancellation or claim by the beneficiary of a guarantee or insurance under its agreement, or trigger any default or early termination clauses.
Banque Publique d'Investissement (BPI)is the entity expected to be tasked by the French state with managing and delivering, under the control of, for the account of and in the name of the French state, the export credit guarantees and insurances.
The book keeping relating to the guarantees and insurances will be recorded in a distinct ledger by BPI, whose activities will be closely monitored by the state, in adherence with the specific guidelines set out by the state. The French state will remain the beneficiary of all rights and obligations stemming from the operations.
COFACE's replacement in its role relating to export-credit guarantees and insurances is also expected to lead to modifications to the stabilisation mechanism provided by Natixis in the name and for the account of the French state, in relation to certain guaranteed or insured export-credit loans. Fitch will assess the implication of any amendments to the stabilisation mechanism at such time.