Fitch Ratings has affirmed Tunisia-based Caisse des Prets et de Soutien des Collectivites Locales’ (CPSCL) National Long- and Short-term ratings at ‘AA (tun)’ and ‘F1+ (tun)’, respectively. The Outlook for the National Long-term rating is Stable. At the same time, Fitch has affirmed CPSCL’s Support Rating at ‘3’.
CPSCL’s National ratings are driven by Fitch’s assessment of the likelihood of it receiving support from the Tunisian State if required, as it is a public establishment (Etablissement Public a Caractere Non Administratif) and plays a unique role in providing infrastructure funding to local authorities. CPSCL’s Support Rating reflects the fact that despite the high propensity of support by the Tunisian state, if required, its ability to do so could be hampered by its creditworthiness.
CPSCL finances Tunisian local authorities through loans and government subsidies as part of the Tunisian state’s five-year development plans. CPSCL’s board of directors is chaired by the Ministry of the Interior. Its management is appointed by the government and reports to the Ministry of the Interior. CPSCL is not a bank and therefore it is not subject to Tunisian banking prudential regulations.
CPSCL’s weak asset quality ratios reflect the local authorities’ poor repayment capacity and historical lack of discipline in servicing their debts. Fitch believes these ratios should be viewed in light of the financial support the Tunisian state permanently provides to local authorities.
Similarly, CPSCL’s performance ratios should be considered in view of its public mission role, limited flexibility in selecting clients and pricing loans. CPSCL’s performance is mainly dependent on lending volumes, which depend on the gradual implementation of the government five-year development plans (the last one covered 2007-2011), and impairment charges.
In addition to its equity base, CPSCL’s funding mostly consists of multilateral long-term loans guaranteed by the Tunisian state. Excess liquidity, placed with local banks (EUR145m at end-2011), provides a significant buffer against liquidity risk.