London, 06 July 2012 -- Moody's Investors Service has today assigned a first-time long-term senior unsecured issuer rating of A2 to Compagnie Européenne de Financement SA ('CEF', 'the company'). The rating outlook is negative.
CEF is an indirectly 97%-owned subsidiary of GDF SUEZ SA ('GDF SUEZ', 'the group', rated A1 negative outlook) and will be primarily responsible for providing inter-company guarantees and loans for subsidiaries of the group. Incorporated in Luxembourg in 1933, CEF owns 100% of GDF SUEZ CC (A3 negative) and GDF SUEZ Treasury Management, as well as certain other investments.
The A2 rating is based on the Declaration of Responsibility by GDF SUEZ in favour of CEF, in accordance with Article 70 of the Luxembourg law of 19 December 2002, and which was recorded in the Luxembourg Trade and Companies register on 13 June 2012. According to this, GDF SUEZ unconditionally guarantees all obligations and liabilities of whatsoever nature incurred by CEF as from 22 June 2011 until revocation by GDF SUEZ of the Declaration ('the Guarantee'). The Guarantee extends to all obligations and liabilities of CEF that arise out of contracts in force at any time between 22 June 2011 and the date of revocation of the Guarantee.
Specifically, the A2 rating reflects Moody's understanding that the group currently has no intention of revoking the Guarantee. However, in the event that the Guarantee were to be revoked, it would continue to cover CEF's existing obligations. Moody's cautions that in the event of revocation, it could adjust CEF's rating downwards by several notches, depending on the company's standalone credit strength and any implicit support from GDF SUEZ, which will depend on CEF's importance to the group at that time.
At A2, CEF's rating is positioned one notch lower than GDF SUEZ's A1 rating. This reflects Moody's view that although the Guarantee provides very strong creditor support, certain of its characteristics warrant a one-notch differentiation from the guarantor's A1 rating. These include the fact that the Guarantee is revocable, as well as the procedure for recovering any unpaid liability, which requires the submission of a written demand to GDF SUEZ by a creditor of CEF.
Moody's notes the important role which CEF is to carry out within the GDF SUEZ group, as a provider of guarantees for group companies, a role that is currently carried out by GDF SUEZ CC. CEF's board of directors consists of senior individuals of GDF SUEZ, including a member of its Executive Committee. CEF's Articles of Association require, inter alia, that it should always be wholly owned by members of the GDF SUEZ group and that its total commitments (i.e., inter-company loans and guarantees) should at all times be at least matched by its subscribed capital.
The A2 rating takes into account that CEF is expected to take over GDF SUEZ CC's book of guarantees, which stood at EUR1.3 billion at end-2011, and Moody's expectation that the level of guarantee activity will rise in a measured way thereafter. It also assumes that GDF SUEZ will maintain full ultimate ownership of CEF, as well as board representation; and that its aggregate commitments will always be at least matched by the total of paid and unpaid equity subscribed by shareholders.
The negative outlook follows the negative outlook of CEF's ultimate parent and guarantor, GDF SUEZ.
WHAT COULD CHANGE THE RATING UP/DOWN
The rating of CEF is based primarily on the explicit support of GDF SUEZ through the Guarantee. CEF's rating is therefore likely to follow the ratings of GDF SUEZ.
The methodologies used in this rating were Unregulated Utilities and Power Companies published in August 2009, and Government-Related Issuers: Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Compagnie Européenne de Financement SA, headquartered in Luxembourg, is 97% indirectly owned by GDF SUEZ SA.
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