Fitch Ratings-Paris/London-15 December 2008: Fitch Ratings has today changed French Region of Rhone-Alpes' Outlook to Stable from Negative. Its ratings are affirmed at Long-term 'AAA' and Short-term 'F1+'.
The Outlook change reflects Fitch's expectations of continued solid debt coverage ratios. The control of operating expenditures growth, including an ongoing reduction of the gap between transferred responsibilities and state compensation will allow the region to post a better current balance than projected this year. Added to a slowdown in capital expenditure from 2008, direct risk is expected to remain below five years by 2010.
The ratings reflect the region's strong socio-economic profile, considerable tax leeway, still moderate debt, prudent financial management and low contingent liabilities. They also take into account the high level of capital expenditure incurred in recent years which had led to deterioration in its self-financing capacity. Fitch will therefore pay particular attention to the region's capital expenditure plan after 2010 regional elections, which will be a key rating driver.
Rhone-Alpes' economy is diversified and dynamic, relying on small- and medium-sized companies. The region's prominent role in R&D, particularly nano-technologies and medicine, is also an asset in attracting multinational firms. Fitch expects the region to adapt its budget to the economic slowdown.Given its favourable economic profile, Rhone-Alpes enjoys above-average tax bases. Its direct tax burden is also well-below average. Assuming its rates are set at the metropolitan average (excluding Ile-de-France), operating revenue in 2007 would have increased 6.3% (EUR110m). However, national reforms have weakened this tax flexibility: in 2007 the business tax reform resulted in a revenue shortfall of EUR22m.
Due to rising capital expenditure, the region only self-financed 73.8% of this spending in 2007 compared with 95.3% in 2003. Capital expenditure is expected to remain high until 2010 (around EUR680m per year).
Debt is moderate. Direct risk (including fiscal lease operations) accounted for 3.5 years of the current balance in 2007 (compared with 1.2 years in 2003) and is expected to remain below five years by 2010. Debt management is cautious. Fitch will pay attention to the region's ability to monitor its debt payback ratio over in the medium term.
The region of Rhone-Alpes has six million inhabitants and is one of the most populous region in Europe. Its main responsibilities include high school education (buildings and operational costs, high schools technical staff), regional railway transport, training (professional and vocational), funding of social and healthcare education, as well as economic development and planning.
Contact: Christophe Parisot, Paris, Tel: +33 (0)1 44 29 91 34.
Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=fUlMq%2F0fpWqfdUF0x4CqSw%3D%3D. You can use this link on the day this article is published and the following day.

Publié le 15 Décembre 2008 Copyright © 2008 Dowjones