March 20 - Fitch Ratings has affirmed Network Rail Infrastructure Finance Plc's (NRIF) GBP35bn multi-currency note issuance programme at 'AAA' and its GBP4bn short-term commercial paper (CP) issuance programme at ' F1+'. The Outlook for the note programme has been revised to Negative from Stable, while the Rating Watch Negative (RWN) on the CP programme has been removed.
The note programme Outlook revision follows the assignment of a Negative Outlook to the United Kingdom's Long-term Issuer Default Rating ('AAA'/Negative/'F1+') on 14 March 2012. The removal of the RWN from the CP programme follows the implementation of a side letter to the financial indemnity (FI) provided by the Secretary of State for Transport (SoS) to NRIF in respect to its note and CP programmes, which ensures that, if required, funds will be made available by the SoS in sufficient time to meet NRIF's maturing CP obligations. This was already the case with respect to obligations arising under NRIF's note issuance programme.
NRIF's long- and short-term ratings are implicitly linked to the UK's long- and short-term ratings on account of the FI from the SoS, whose liabilities are sovereign obligations of the United Kingdom. The FI is an unlimited, irrevocable and unconditional obligation terminating on 3 October 2052.
Under the FI, the SoS will have up to 20 days to meet a claim relating to a note principal repayment, and up to five days to meet a claim relating to a note interest payment or CP principal payment. The FI states that, should NRIF have insufficient cash to cover an upcoming note-related obligation, either the Programme Administrator or Security Trustee is required to submit a claim under the FI to the SoS 21 days or six days prior to the obligation arising for principal and interest obligations respectively.
The side letter implemented on 19 March 2012 modifies the FI such that, should it have insufficient cash to meet an upcoming CP obligation, NRIF is required to submit a claim under the FI six days prior to the obligation arising. As such, Fitch is comfortable that the structural support provided by the SoS is sufficient to ensure a full alignment of both NRIF's long- and short-term ratings with those of the UK sovereign.
Fitch conducted a Rating Assessment Service for NRIF on 27 January 2012.