OREANDA-NEWS. Fitch Ratings has affirmed Spain-based Criteria CaixaHolding, S.A.U.'s (Criteria) Long-term Issuer Default Rating (IDR) at 'BBB-' with Positive Outlook, Short-term IDR at 'F3' and Viability Rating (VR) at 'bbb-'. The rating action follows CaixaBank, S.A.'s voluntary tender offer for Portugal-based Banco BPI, S.A. At the same time, the agency has affirmed Criteria's Support Rating at '5' and Support Rating Floor at 'No Floor'. A full list of rating actions is available at the end of this rating action commentary.

The rating action is in line with the rating action taken on CaixaBank, the main operating subsidiary of Criteria, in a separate rating action commentary (see Fitch Affirms Spain's Caixabank at IDR 'BBB'; Outlook Positive, dated 25 February 2015 at www.fitchratings.com).

KEY RATING DRIVERS - CRITERIA'S IDRS, SENIOR DEBT AND VR
The Long-term IDR of Criteria is based on its VR, which is primarily driven by the standalone credit profile of CaixaBank as this is the main asset of Criteria, accounting for around 55% of its unconsolidated balance-sheet. Fitch believes that it is Criteria's intention to remain the long-term controlling owner of CaixaBank.

There is a one-notch differential between the VRs of Criteria and CaixaBank to reflect planned dilution of Criteria's ownership in CaixaBank to 56% from the current 59%, once exchangeable bonds of Criteria are converted into shares of the bank by 2017. Criteria's VR also takes into account the company's large equity holdings in corporates (although these are largely liquid and listed), double leverage, and the level and structure of its debt and liquidity position.

Criteria's equity investments in corporates had a book value of EUR7.5bn at end-2014 (30% of total assets) and the biggest investments related to a 34.3% stake in Gas Natural SDG, S.A. (BBB+/Stable), a 19.2% stake in Abertis Infraestructuras S.A. (BBB+/Stable) and a 5.7% interest in Suez Environnement. The holding company also owns a legacy portfolio of real estate assets that is slowly being managed down.

In accordance with Fitch's criteria for bank holding companies, Criteria's double leverage stood at close to 90% at end-2014. However, given the broader range of assets on Criteria's balance-sheet, various assumptions are made in this calculation. When including assets other than the stake in CaixaBank, which Fitch views as fairly illiquid (primarily unlisted equity investments and real estate assets), Criteria's double-leverage is at about 115%.

In our view, Criteria's funding and liquidity management is adequate. Net debt totalled EUR8.9bn as of end-2014, primarily consisting of retail-placed subordinated debt, senior debt issuance and bank loans. There are sizeable debt maturities in 2019 and 2020 which Fitch expects to be proactively managed.

Fitch assesses the holding company's debt-servicing capabilities based on potential cash flows from CaixaBank, which the agency expects to improve as the subsidiary moves towards cash dividends and earnings grow due to better domestic economic prospects. Fitch also takes into consideration cash flows derived from Gas Natural and Abertis, which have been rather steady over the years. These investments are listed and their valuations remain above their market values, also supporting Criteria's liquidity.

Criteria has no banking license, but is supervised and regulated by the banking authorities on a consolidated basis given its stake in CaixaBank. At end-2014, the transitional common equity tier 1 (CET1) ratio was 12.1%, but included large transitional items from minority interests of CaixaBank and deferred tax assets that will put CET1 under pressure as they are being phased out.

RATING SENSITIVITIES - CRITERIA'S IDRS, SENIOR DEBT AND VR
Criteria's IDRs, VR and senior debt ratings remain sensitive to the same factors affecting CaixaBank's VR. Criteria's ratings would also suffer from an ownership dilution in CaixaBank that is above current expectations, resulting in a loss of control over CaixaBank and/or changes in the supervision approach of the group. Downside pressures could also arise from write-downs of assets and/or higher debt or double leverage.

KEY RATING DRIVERS AND SENSITIVITIES - CRITERIA'S SR AND SRF
Criteria's SR of '5' and SRF of 'No Floor' reflect Fitch's belief that future support from the state, although possible, cannot be relied on. This is because Criteria is a bank holding company rather than a deposit-taker.

KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Subordinated debt held by Criteria (and previously issued by La Caixa) is notched down once from its VR to reflect above-average loss severity relative to senior unsecured debt. In line with the affirmation of the VR, subordinated debt ratings have been affirmed and are broadly sensitive to rating actions taken on Criteria's VR.

The rating actions are as follows:

Criteria:
Long-term IDR: affirmed at 'BBB-'; Outlook Positive
Short-term IDR: affirmed at 'F3'
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Senior unsecured debt long-term rating: affirmed at 'BBB-'
Subordinated debt: affirmed at 'BB+'