Fitch Ratings has upgraded Union Finances Grains' (UFG) negotiable European commercial paper (NEU CP) programmes and CPs guaranteed by
This mirrors a similar action taken on the long-term and short-term senior preferred (SP) debt of
Fitch has also affirmed at 'F1+' the short-term ratings of UFG's other four CP programmes guaranteed by
Key Rating Drivers
Ratings Based on Guarantees: The ratings of UFG's NEU CP programmes and the associated CPs are aligned with the respective guarantor banks' or ultimate parent's short-term SP debt ratings or Fitch's assessment of the creditworthiness of the banks. The ratings reflect our view that each guarantor will honour their unconditional, irrevocable and timely guarantee, if required.
Six Bank Guarantors: The six French commercial banks guaranteeing UFG's CP programmes are CACIB, LCL, BECM, BCO,
Protection from Junior Debt Buffer: The CP programmes and CPs guaranteed by the six banks benefit from the protection that accrues to their respective SP creditors from more junior bank resolution debt and equity buffers held by their respective parent groups (
Maximum Programme Limit: Currently the banks guarantee the repayment of their respective CP programmes, subject to a total issuance limit of
Severally Liable Guarantee: The banks' guarantees are independent of one another and are not joint. Guarantees are renewed annually on 1 July and cover CPs issued up to 30 June of the following year and maturing before 30 September of that year. The CPs have a maximum maturity of 92 days.
UFG Is Solely an Issuing Vehicle: UFG is a union of agricultural cooperatives with 34 members at end-2021. Fitch does not rate UFG as it is purely an issuing vehicle, whose sole purpose is to issue CPs to fund part of the cooperatives' cereal inventories. UFG has no funding needs for its own operations and its overheads are paid by contributions from its cooperative members.
Promissory Notes Secure Guarantors: The advances extended to cooperatives are secured by promissory notes based on their cereal inventories and issued for the benefit of the bank guarantors. The notes are endorsed by FranceAgriMer (FAM), a state-owned entity supervised by the
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The ratings of UFG's CP programmes and CPs guaranteed by CACIB and LCL could be downgraded if CACIB's Short-Term Issuer Default Rating (IDR) is downgraded or if LCL's creditworthiness deteriorates, in our view. The ratings could also be downgraded by one notch if Fitch no longer expects
The ratings of UFG's CP programmes and CPs guaranteed by BCO and BECM could be downgraded if BCO's and BECM's creditworthiness deteriorates, in our view. The ratings could also be downgraded by one notch if Fitch no longer expects Credit Mutuel Alliance Federale to meet its resolution buffer requirements with only senior non-preferred debt and more junior instruments.
The ratings of the CP programmes and CPs guaranteed by
The ratings of the six programmes and CPs could be downgraded if Fitch's assumptions about the guarantors' propensity to honour their guarantee change. This could notably result from a weakening of the terms of the guarantees.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
UFG's CP programmes ratings benefit from the highest possible short-term rating of 'F1+' and, therefore, cannot be upgraded.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
The ratings of the programmes and associated CPs are driven by the irrevocable and unconditional guarantee from their respective bank guarantors.
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