CANADA- Moody's Investors Service maintained a stable ratings outlook for CDP Financial, the debt issuing subsidiary of Caisse de dépôt et placement du Québec, but showed concerns over the firm's risk management capabilities.
Moody affirmed the Aaa senior unsecured and Prime-1 short-term rating, but senior credit analyst Peter Routledge said: "Moody's cites the sizable concentration that the Caisse built up in non-bank administered asset-backed commercial paper (non-bank ABCP) and the liquidity calls resulting from the Caisse's alternative investment strategy as evidence of shortcomings in risk management."
In February, Caisse revealed a decline in assets of C$39.8bn (US$31bn) in large part because in drops in the value of Canada's asset-backed commercial paper. Caisse also announced investment returns of -25% for 2008, the worst in the firm's history. (Global Pensions, 26 February 2009)
This led Standard & Poor's to place Caisse on "ratings watch negative," though it maintained a AAA rating.
"Decreased stability in the senior management team," also played a role in S&P's decision.
S&P's report said: "In 2009, for the third time in 12 months, the Caisse will have a new CEO." In January, Richard Guay, former CEO resigned after having been on an extended medical leave.
But Caisse's low level of debt and strong cash positions support a Aaa rating, said Moody's.
Moody's report said: "The ratings are primarily driven by strong liquidity and the very low ratio of secured and unsecured debt of the Caisse to the reported fair value of its assets: about 30% secured debt/assets, followed by about 8% unsecured debt/assets, as at the end of 2008."
It continued: "The Caisse's 'participation deposits' from its various contributing pension plans rank behind the unsecured debt, and provide a very material 62% cushion to the unsecured creditors against any future asset value deterioration."
Officials at Caisse said in a release: "The Caisse de dépôt et placement du Québec is satisfied with the update issued by Moody's… The Caisse has taken note of the agency's comments on possible improvements to its risk management practices and will work closely with it on this matter."
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