OREANDA-NEWS.  Fitch Ratings has revised SEMAPA's Outlook to Negative from Stable and affirmed its Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'AA-' and Short-term foreign currency IDR at 'F1+'.

Fitch has also affirmed SEMAPA's EUR340m euro medium-term programme (EMTN) at 'AA-'/'F1+' and its EUR150m French commercial paper (billets de tresorerie; BT) programme at 'F1+'

KEY RATING DRIVERS
Fitch rates SEMAPA on a top-down basis under its public-sector entity rating criteria, due to its tight control and strong support from its 92% owner and public sponsor, the City of Paris (AA/Negative/F1+). Despite its large development projects, SEMAPA is rated one notch below its sponsor as we do not consider SEMAPA to be a priority for the City of Paris in times of financial distress. The Outlook on SEMAPA reflects that on the city.

As a public limited company (SPLA), SEMAPA can only be owned by local authorities. The city exerts strong administrative, legal and financial oversight over SEMAPA, in the same way it oversees its own departments. Fitch believes this should help keep SEMAPA's budget in check.

Although SEMAPA's debt is not included in Paris's accounts, SEMAPA benefits from a guarantee from the city for 80% of its total long-term debt. In case of need, SEMAPA would benefit from a temporary cash advance from its sponsor. However, this advance could take time, as it is subject to a financing agreement which must be approved by a resolution passed by the City Council of Paris. Fitch considers that this period is a weakness for SEMAPA.

According to its SPLA status, SEMAPA can only operate within the mandates its shareholders assign to it, and in accordance with the law, it is only allowed to develop on territory that belongs to its shareholders. Even if SEMAPA's activity was developed on other projects in the short term, its current activity is mainly concentrated on the "Paris Rive Gauche" project (representing 90 % of total revenue), of which it is the urban developer. This project is the main redevelopment programme in Paris.

Fitch considers SEMAPA's business risk to be limited as the financial risk of almost all its activity is borne by the City of Paris, which means the city is ultimately responsible for SEMAPA's rights and obligations at the end of each project. In case of modifications to a project, Paris's financial contribution will be adjusted with the aim of balancing the project's budget. At end-2014, all operations managed by SEMAPA posted a balanced result. For its own activity, SEMAPA posted a slightly positive net result of EUR0.4m.

SEMAPA's activity consists of acquiring land and subsequently monetising the assets it develops. Due to the limited size of equity (EUR5.2m at end 2014), in comparison with the size of the operations, SEMAPA is forced to rely on external financing. Its financial needs will reach EUR479.8m at end-2015.

To cover its financing needs, in addition of its bank loans, SEMAPA has diversified its funding packages with an Euro Medium-Term Notes programme with a ceiling at EUR340m (of which 80 % can be guaranteed by Paris), and a Commercial Paper Programme of EUR150m. Fitch considers that this diversification reduces the risk of refinancing in the medium term, as SEMAPA has expressed its aim to plan its programmes according to those made by the City of Paris.

RATING SENSITIVITIES
Any rating action on the City of Paris could be reflected by SEMAPA's he ratings.

Changes in the city's control and financial support of SEMAPA could have a negative impact on its ratings.