CADES Info no. 1 (February 1997)

CADES NEWSLETTER - FEBRUARY 1997 - #1

 
Benoit Jolivet
Président de la CADES

Cades was set up by government ordinance on January 24, 1996. This provides the framework for financing of the social security debt transferred to the new entity, as well as management of related fiscal resources.

Operational since April 28, 1996, Cades arranged, in the space of two months, financing for the full FF137 billion it is to amortize by 2009, and is continuing to restructure this debt by substituting long and medium-term instruments for the original short-term arrangements.

These operations were carried out on French and international markets, using a wide variety of different instruments.

Top ratings and a Cooke ratio of 0% mean that Cades issues are much sought after, and their quality has won encouraging recognition from the financial press.

With the support of the French Treasury and the Direction de la Sécurité Sociale, its supervisory authorities, Cades will remain an active market participant in 1997. It will continue to emphasize creativity and quality of management, paying close attention to market trends and investor needs. The quality of issues, their liquidity and the clarity of accounting information will naturally remain the cornerstones of our commitment.

Our first French-franc issue in January 1997 is in full keeping with these principles.

And we will continue to consolidate our debt with issues denominated in French francs and other currencies, building on the confidence and cooperation of investors.

This is the first issue of a newsletter designed to ensure that information on Cades and our activities is as widely available as possible in the year ahead -- a year we hope will prove fruitful for ourselves and our partners.

Cades at a glance 

On June 30, 1996, Cades took over debts totalling FF137 billion accumulated by France's social security system in 1994, 1995 and part of 1996.
Cades has been assigned the task of amortizing this debt by January 31, 2009.

To achieve this, Cades will:

• Arrange appropriate financing by offering domestic and international investors a broad range of instruments such as short-term notes, commercial paper in French francs and other currencies, syndicated loans and bonds.
• Manage the resources generated by the RDS -- for Remboursement de la Dette Sociale -- income levy earmarked for its exclusive use over 13 years and one month.

These resources, expected to represent approximately FF25.5 billion in 1997, will enable Cades to:

• repay short and long-term borrowings
• pay the French State FF12.5 billion each year to amortize debts of FF110 billion taken over by the State from the social security system with the prior guarantee of Fonds de Solidarite Vieillesse (old age solidarity fund)
• make an exceptional payment of FF3 billion, relating only to 1996, to the Caisse Nationale d'Assurance Maladie et Maternite des Travailleurs Non-Salaries des Professions Non-Agricoles (healthcare fund for independent non-farm workers).
  

Cades has won top ratings for both the short and long term:

• Standard & Poor's: AAA and A1
• Moody's: Aaa and P1
• IBCA: AAA and A1+
  
  

  
  

1996 issues

In its first year on financial markets in France and abroad, Cades issued five bonds.

Three bonds in French francs:

• FF18.9 billion at 5.5% maturing April 25, 2002
• FF14.5 billion at 6% maturing July 25, 2005
• FF14.9 billion at 6.25% maturing October 25, 2007.
  

  Two bonds in other currencies:
  

• NLG 3 billion at 6.35% maturing July 25, 2004
• US$ 2 billion floating rate notes maturing December 10, 2001.
  

   

  1. Part of issues on the French markets was by auction, a technique generally used by the French Treasury, but not used by other issuers since 1989.

  2. Against a favorable backdrop of declining interest rates, Cades clearly won the confidence of investors, as reflected in the level and stability of spreads over benchmark Treasury issues.
  

RDS levy: the main resource of Cades Revenues from the RDS levy to December 31, 1996 reached approximately FF20.5 billion.

In 1997, the levy will be charged over the full year for the first time, and its base has been extended to include family benefits and savings income. Revenues should thus be in line with the forecast of FF25.5 billion.

1997 Outlook

In 1997, Cades will be continuing issues on international markets. However, we will also be looking into transactions with specific investor groups as a means of achieving optimum debt structure and cost. During the year, medium and long-term issues should amount to between FF35 billion and FF45 billion.

Debt at December 31, 1996

Approximately 50% of short-term debt has now been consolidated through long and medium-term issues.

Investors cover a broad geographical range, reflecting the confidence of international markets.

The variety of instruments reflects Cades's creative management approach and commitment to meeting investors' varied requirements.

IFR and Euroweek awards

In its issue dated December 21, 1996, IFR named Cades the "Best debut issuer" of the year and the "Best issuer of commercial paper".

And a Euroweek survey covering 1996 rated Cades the "Most impressive issuer" on international capital markets.

Full information with regular updates

Cades publishes a range of documents to keep investors informed:

• Cades business profile, of which 10,000 copies have been distributed, is available on request in French, English and German
• Cades Info: a newsletter with a circulation of 12,000 in French and English
• Annual report, the first to be available in May 1997.
• Internet site at http://www.cades.fr

The estimates, opinions and forecasts appearing in this newsletter reflect the information available to us at the date of publication, but additions and corrections may be made without notice. Neither Cades nor any of its representatives may be held liable for any use made of the information contained in this newsletter.