(The following statement was released by the rating agency)
July 16 - Fitch Ratings has affirmed Pequenos y Medianos Astilleros, Sociedad de Reconversion, SA’s (Pymar) Long-term Issuer Default Rating (IDR) at ‘BBB-’ and Short-term IDR at ‘F3’. The Outlook is Negative. The Long-term IDR has been removed from Rating Watch Negative (RWN).
The removal of the RWN reflects the closer link between Pymar and the sovereign in view of the written resolutions from the Ministry of Industry, Energy and Tourism confirming its support through the Re-Structural Fund (FR), managed by Pymar, to cover any shortfall, if necessary, in Pymar’s Guarantee Fund (FPG). The Negative Outlook reflects the Outlook on the sovereign rating.
Fitch has adopted a top-down rating approach for Pymar from its public-sector sponsor, the Kingdom of Spain (‘BBB’/Negative/‘F3’). The rating differentiation between Pymar and the state is now one notch as opposed to three notches previously because of the closer link to the sovereign through the resolutions. This written commitment has been confirmed by the new government.
Given the difficult global economic climate, a number of shipyards have suffered financial difficulties. As a consequence a significant number of guarantees issued by Pymar have been called and the value of the FPG declined by EUR89.9m in 2011 and Pymar expects that additional claims are likely in 2012. However, Pymar also expects some recoveries from counter-guarantees received.
The present FPG will be liquidated in an orderly manner once all the existing guarantees have been cancelled/called upon. As at end-May 2012 total outstanding guarantees were EUR 146.6m, far below the 2008 level of EUR1.2bn as a result of guarantees expired and guarantees executed - no new guarantees have been authorised since early 2011. The breakdown of the guarantees was EUR46.8m to ship builders and EUR99.8m to ship buyers and the maximum maturity will be 2019. The FPG will, according to the terms of the resolution, fully cover all guarantees in existence and Pymar cannot issue any fresh guarantees under its existing FPG.
Pymar is in the process of establishing a new fund so that fresh guarantees can be issued. However, Fitch understands that the criteria for issuing guarantees will be stricter.
Pymar is a private company established in 1985 by a group of shipyards to facilitate the restructuring of small and medium-sized Spanish shipyards in accordance with the provisions of Royal Decree 1271/1984. Apart from the activities established in the Royal Decree, Pymar manages the FPG, against which the company issues guarantees to shipping companies and financial institutions on market terms to promote the shipbuilding sector.
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