OREANDA-NEWS. S&P Global Ratings said today that it had affirmed its 'AAA' long-term foreign currency issuer credit rating on European Coal & Steel Community in Liquidation (ECSCiL). The outlook is stable.

The supranational EU, acting through the European Commission (EC), is responsible for managing ECSCiL's assets and winding up ECSCiL's financial affairs. Our rating reflects our view of the insularity of ECSCiL's balance sheet; its liquid assets, which are equivalent to 9x ECSCiL's remaining debt obligations; and our view that ECSCiL's shareholders, the 28 members of the EU, are motivated to wind up its affairs in an orderly manner.

ECSCiL's assets amply cover its outstanding liabilities. Its assets totaled €1.97 billion and liabilities €401.6 million as of Dec. 31, 2014. These assetsare subject to valuation and credit risk; approximately 86% are invested in "available-for-sale" securities. The majority of exposure (34.1%) is sovereign, with concentrations in Germany (21%) and France (23%), but also in banks and financial institutions (30.7%), certain supranational entities (6.8%), and other public issuers (26%). However, given that ECSCiL's total assets are nearly 5x total liabilities (including nondebt liabilities), we expect ECSCiL to have sufficient funds to retire all of its debt through its last outstanding bond, which matures in late 2019, with a 'AAA' level of confidence.

Any net revenue generated by ECSCiL's assets is retained over a two-year project evaluation period and then transferred to the EU budget to be used to fund research in sectors associated with the coal and steel industries. Total income again declined slightly over 2014, to €58 million, from €63 million in 2013, predominantly reflecting the sale of securities in 2013; income from their sale increased about 300% to €21 million from €5 million in 2012, albeitwith an offsetting 32% decline in returns on fixed-income debt securities. Netrevenues on investments totaled €38 million, slightly lower than in 2013.

The stable outlook reflects our view of ECSCiL's positive net asset position and the EU's committment to wind up ECSCiL's financial affairs so that all of its financial obligations are fully met.

We do not expect the EU to redirect or in any other way to interfere with pastEC agreements governing the management of ECSCiL's assets, which, alongside any revenues derived from its balance sheet, are to be used exclusively for research in the coal and steel industries (Council Decision 2003/76/EC). If this council decision were amended in a manner we viewed as prejudicial to ECSCiL's creditors, we would likely equalize our rating and outlook on ECSCiL with our rating and outlook on the EU or lower the rating and revise the outlook to below those on the EU.

Similarly, if ECSCiL's leverage were to substantially worsen, we could lower the rating.