Fitch Downgrades European Financial Stability Facility to 'AA+'
Link to Fitch Ratings' Report: European Financial Stability - Rating Action ReportLONDON, July 15 (Fitch) Fitch Ratings has downgraded the European Financial Stability Facility's (EFSF) guaranteed and long-term debt Long-term rating to 'AA+' from 'AAA'. The EFSF's short-term (less than 12 months contractual maturity) guaranteed debt instruments' Short-term rating has been affirmed at 'F1+'. KEY RATING DRIVERS High Weight The rating actions were prompted by Fitch's downgrade of France's Long-term Issuer Default Ratings (IDRs) to 'AA+'/Stable and the affirmation of its Short-term rating at 'F1+' on 12 July 2013. EFSF's ratings rely on the irrevocable and unconditional guarantees and over-guarantees provided by euro areas member states (EAMS). These commitments are governed by an international agreement dated in June 2012 by the 17 EAMS - the EFSF Framework Agreement (FA) - and by a Deed of Guarantee. The downgrade of France's IDR had a high weight in Fitch's rating actions. The original version of the FA ensured that all payments due on EFSF debt are covered by guarantees provided by EAMS, pro-rata based on their contribution key in the European Central Bank, which could be extended to 120% of their initial amount. Subsequent amendments to the FA and Deed of Guarantee, applicable to all debt issued since October 2011, reduced the credit enhancement through cash buffers and extended the percentage of over-guarantee percentage to 165%. Following the downgrade of France's IDR, the EFSF's long-term debt issues are not fully covered by 'AAA' guarantees and over-guarantees and, for debt issued before October 2011, by the cash reserve. However, short-term debt issues remain entirely covered by guarantees and over-guarantees issued by EAMS rated 'F1+'. RATING SENSITIVITIES As of 12 July 2013, 100% of the long-term debt issued by the EFSF is covered by guarantees and over-guarantees rated 'AA+' and 'AAA'. In the event that one or more of the 'AAA' and 'AA+' guarantors, namelyGermany (AAA/Stable), France (AA+/Stable), Netherlands (AAA/Negative), Austria (AAA/Stable), Finland (AAA/Stable), and Luxembourg (AAA/Stable), are downgraded below 'AA+', and if the coverage by 'AA+' guarantees falls below 100%, Fitch would also review the Long-Term rating assigned to EFSF debt issues. KEY ASSUMPTIONS Fitch assumes there will be progress in deepening fiscal and financial integration at the eurozone level in line with commitments by euro area policy makers. Fitch also assumes that the risk of fragmentation of the eurozone remains low. Contact: Primary Analyst Eric Paget-Blanc Senior Director +33 1 44 29 91 33 Fitch France SAS 60 rue de Monceau 75008 Paris Secondary Analyst Amelie Roux Director +33 1 44 299 282 Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Rating Multilateral Development Banks', dated 12 May 2012, are available at www.fitchratings.com. Applicable Criteria andALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
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