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Investing.com -- On Friday, May 2, 2025, Fitch Ratings announced an upgrade to SEMAPA’s Long-Term Foreign and Local-Currency Issuer Default Ratings (IDRs) from ’A+’ to ’AA-’. Despite the upgrade, the outlook remains negative. The upgrade was driven by increased support from the City of Paris, with a larger portion of adjusted debt now guaranteed by the city.
Fitch’s upgrade reflects the expectation that over 75% of SEMAPA’s adjusted debt will continue to be guaranteed by the city in the medium term, an increase from 76% at the end of 2024. SEMAPA’s operations are governed by seven concession agreements with the City of Paris, which are valid until 2032. These agreements define the duration, scope, and financial balance of the respective activities.
The City of Paris maintains close control and monitoring over SEMAPA, similar to its own services. By the end of 2024, more than 75% of SEMAPA’s adjusted debt had an explicit first-demand guarantee from Paris. Under the concession agreements, the city is committed to ensuring that SEMAPA’s operations are financially balanced at the end of each concession contract.
SEMAPA, a local public development company, designs, plans, and carries out urban development projects for the City of Paris. The company has an exclusively public shareholding structure, with Paris as its main shareholder. SEMAPA’s financial debt totaled EUR324 million at the end of 2024. The company benefits from diversified funding, which reduces refinancing risk.
According to Fitch, a SEMAPA default would disrupt funding access and increase the cost of debt for the city. SEMAPA is one of the city’s most indebted entities, representing 4% of its debt at the end of 2024. The city’s guarantee would be triggered, even if the default occurs on a non-guaranteed obligation, due to the presence of a cross-default clause in its EMTN programme.
Fitch does not assign a Standalone Credit Profile (SCP) to SEMAPA due to its strong financial and operational links with Paris. The rating incorporates a high likelihood of support from the City of Paris, as more than 75% of SEMAPA’s debt is guaranteed by the city.
Fitch also upgraded SEMAPA’s senior unsecured long-term ratings, in line with the rating action on its Long-Term IDRs. SEMAPA’s Short-Term IDRs of ’F1+’ are the only option possible for its Long-Term IDRs of ’AA-’.
Despite the upgrade, the ratings could be negatively impacted if Fitch’s internal credit assessment of the City of Paris is revised positively, or if the share of SEMAPA’s debt guaranteed by the City of Paris falls consistently below 75%. A downgrade could also result from a weakening of the city’s support through a significantly lower assessment of strength-of-linkage or incentive-to-support factors.
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