Coface Places Spain on Negative Watchlist and Keeps Up the Negative Watch Put on the USA and UK During the Second Quarter of 2007

Coface Places Spain on Negative Watchlist and Keeps Up the Negative Watch Put on the USA and UK During the Second Quarter of 2007

October 23, 2007

    PARIS, Oct. 23 /Xinhua-PRNewswire/ -- Spain is the
third large industrialised country to be placed on negative
watchlist by Coface in 2007. Indeed, Spain presents a risk
of contagion of the property crisis and seems similar to
the situation in the US and UK, placed on negative
watchlist by Coface in April and July respectively.   

    Among emerging European countries, the A4 rating for
Romania has also been placed on negative watchlist.  The
Romanian currency is proving to be the most in danger among
emerging countries and makes its economy vulnerable to a
crisis of confidence.  The increase in private sector debt
gives reason to fear a deterioration of company payment
behaviour.  

    Spain vulnerable to a risk of contagion of the American
property crisis  

    The household debt rate is reaching proportions
comparable to that of the UK and US (130%, 163% and 138% of
disposable income respectively).  Corporate investment, also
heavily in debt, will suffer from the credit squeeze too. 

    Spanish growth should slow down and fall to 2.9% in
2008, compared to 3.8% this year, notably due to the fall
in housing investment, which significantly contributes to
growth and employment, and the deceleration of household
consumption from 3.2% to 2.7%. 

    Payment behaviours, which have been satisfactory until
now, risk deteriorating.  Small and medium-sized firms
linked to housing markets (finishings, estate agents,
manufacturers and distributors of domestic materials and
equipment), and who have recently grown in number, often
find themselves in debt and exposed to slackening growth. 


    Spain is the third industrialised country to be placed
on negative watchlist by Coface since the beginning of the
year.  "Spain is sharing the dangerous cocktail of
real estate bubble and household overindebtedness with the
US and UK" explains Yves Zlotowski, Chief economist
for Coface. 

    The US and UK remain on negative watchlist  

    Coface is keeping the US on negative watchlist, having
placed it on the list on April 10.  Coface had thus
highlighted the signs of American economic slowdown,
property market difficulties, as well as the credit squeeze
and their possible impact on the financial soundness of
businesses. 

    With the situation in the UK showing strong
similarities to that in the US, Coface is keeping the
country on negative watchlist, where it was placed on July
10.  

    In our opinion, the American slowdown could extend into
2008.  If global payment behaviours remain good, some
companies, notably those financed by LBOs, could be
weakened, all the more so if they are faced with a
"credit crunch". A deceleration is also looming
over the UK. Retail trade and other closely related sectors
are the most vulnerable.   

    Exchange rate risk in Romania  

    Romania is particularly severely hit by the financial
crisis set off in the US this summer: the leu has fallen
significantly.  It is the most vulnerable currency among
all the emerging countries.  The vulnerability to a
confidence crisis is particularly strong as the current
deficit is at a level which is difficult to maintain (14%
of GDP predicted for this year).   

    Rapidly rising corporate debt is worrying. Companies
would be seriously weakened in the case of a currency drop
or a downturn in activity.  

    Finally, disagreements at the highest level of State
have slowed down the speed of reforms, including those
relating to governance. 

    About Coface 

    Coface, rated AA+ by Fitch Ratings, AA by S&P and
Aa3 by Moody's, is a subsidiary of Natixis whose share
capital (Tier 1) was 11.6 billion euros end June 2007. 
Coface's mission is to facilitate global
business-to-business trade by offering its 105.000
customers four product lines to fully or partly outsource
trade relationship management and to finance and protect
their receivables: credit insurance, company information
and ratings, receivables management and factoring.  Coface
alsooffers, in France, management of government export
guarantees.  Thanks to the worldwide local service
delivered by 6,000 staff in 64 countries, over 45% of the
world's 500 largest corporate groups are already customers
of Coface. http://www.coface.com 

    Country rating methodology

    The Country @ rating assigned by Coface reflects the
average level of short-term non-payment risk associated
with companies in a particular country. It reflects the
extent to which a country's economic, financial, and
political outlook influences financial commitments of local
companies.  Ratings are based on twofold expertise developed
by Coface: 

    -- macroeconomic expertise in assessing country risk
based on a battery of 
       macroeconomic financial and political indicators 

    -- microeconomic expertise that draws on Coface
databases covering 44 
       million companies worldwide and 50 years experience
with payment in 
       trade flows it guarantees. 7 families of risk are
combined in order to 
       determine an overall rating for each of the 154
countries monitored. 
       Coface ranks country ratings on seven risk levels,
A1, A2, A3, A4, B, C 
       and D, in the order of increasing risk. The seven
risk families are: 
 
       -- Growth vulnerability 
       -- Foreign currency liquidity crisis  
       -- External over indebtedness 
       -- Sovereign financial vulnerability 
       -- Banking sector's fragilities 
       -- Geopolitical and Governance vulnerabilities 
       -- Company payment behaviour. 
	Specific information on each country is available at
http://www.cofacerating.com 


    For more information, please contact:

     Qingqing Wang / Chloe Yao
     Tel:   [phone]
     Email: [e-mail]
            [e-mail]