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S&P cuts rating on French SNCF rail company debt

04 June 2010, 18:55 CET
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(PARIS) - Standard & Poor's said on Friday it had downgraded debt held by French rail operator SNCF because European Union regulations could impose constraints on future state aid to the company.

The ratings agency said it had lowered its assessment on SNCF to AA+ from AAA.

"We believe that SNCF's most profitable core rail businesses will gradually become exposed to competition," S & P said.

"In addition we believe that EU rules may place increasing constraints on any potential government support for SNCF that is not based on a pure financial rationale."

The EU's executive commission in mid-February sent a letter to the French government expressing the view that the statute governing the SNCF could "lead to an unlimited financial guarantee of (the company's) debts," which it said was "contrary to European competition regulations."

Some experts say that hitherto, in view of the state guarantee, credit rating agencies equated debt issued by the SNCF to debt issued by the French state.


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