1 A simple mission, A complex communication November 2005.
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Transcript of 1 A simple mission, A complex communication November 2005.
1
A simple mission,
A complex communication
November 2005
2
IntroductionIntroduction
CADES is a public agency that was established in 1996 to amortize the French social security debt.
Its mission was then significantly modified in 1998, 2000, 2002 and 2004.
CADES carried out an ambitious issue program in 2004 (€41 billion) and in 2005 (€35 billion).
Communication is a key factor and shows various aspects.
3
Outline
1. A brief description of CADES p.4
2. The various aspects of our communication p.11
3. Problematic and contradictions p.14
4. Choices of CADES p.17
Appendices p.20
4
-I -I -
CADES: Brief descriptionCADES: Brief description
5
CADES: a simple mechanism
An agency created in 1996 by the French State to amortize the debt generated by the French social security program and ease reform of the system.
At low cost to French taxpayers, thanks to its lean structure and use of efficient financial instruments.
A simple mechanism designed to amortize the social security debt:
CADES borrows in the financial markets.
Cash flows to investors are secured through CRDS, a tax entirely dedicated to CADES.
CADES and CRDS will disappear at a fixed date.
6
CADES: recognized credibility of a quasi–sovereign risk
Legal status: Etablissement Public Administratif…
… with a commitment from the State to investors: Solvency and liquidity guarantee Strict management control (Cour des Comptes, external audits)
The highest ratings: Long term: Aaa/AAA/AAA (Moody’s, S&P, Fitch Ratings) Short term: P-1 / A-1+ / F1+ (Moody’s, S&P, Fitch Ratings)
0% risk weighting for solvency ratio and Zone A central government status
Liquidity on the secondary market: listings on local exchanges, electronic platforms
7
CADES: optimal management
Implementation of an asset/liability management model to optimize cost / volatility trade-off
Use of adapted and diversified financial instruments: index-linked bonds, private placement, bonds denominated in foreign currencies
Systematic hedging of foreign exchange risk
Significant reduction in counterparty credit risks through weekly margin calls
8
1996: Assumption that Social Security will be back to equilibrium in 1997: Creation of CADES and CDRS until 2009: take over of €46 billion in debt
1998: Assumption that Social Security will be back to equilibrium in 1998: Take over of €13 billion in new debt; final life time postponed to 2014
2000: 1st Modification by law of the base of CRDS calculation 2002: 2nd Modification by law of the base of CRDS calculation
2004: Assumption that Social Security will be back to equilibrium in 2007:Take over of €50 billion in new debt; the end date of 2014 is eliminated
- CADES will continue to exist until the debt is fully extinguished.- Should CADES receive some new debt after 2006, the government will have to decide accurate measures to maintain its final maturity.
Key reforms along CADES’ life
9
Positioning of CADES’ issue program
Expected funding requirements for sovereign and quasi-sovereign issuers in 2005
(In € billions)
Source: CSFB estimates, Euro Issuance Outlook, July 29, 2004(i) BTP only(ii) World Bank. Equivalent to USD18 bn – Exchange rate applied: US$/€uro: 1.2
0
20
40
60
80
100
120
140
160
Germ
any
Italy
(I)
Franc
eKFW EIB
Spain
CADES
Nether
lands
Belgium
Austri
a
Portu
gal
IBRD (i
i)
141
130111
5250
40 3530
20 15 1210
10
CADES has now repaid nominal of €28.4 billion
Total CRDS receipt (i)
Capital amortized (est.) 28.4
Interest paid (est.) 14.6
43
Voted debt 110.4
Estimated net liability position 72.4
(1)
(2)
(1) - (2)
Source: CADES(i) included Euro 0.5 Billion for the sale of real estate assets
(€ billions)
As at november 12, 2005
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- II - The various aspects of our communicationThe various aspects of our communication
12
Which targets ?Which targets ?
Investors: - institutional, retail - domestic, international
Rating agencies
Authorities: ministries in charge of supervision
Parliament: political power and citizen representatives
Press
13
Which reasons ?Which reasons ?
Regulation: information to investors under the supervision of the market
authorities
Marketing: - to extend the investor base
- to lower the cost of funding
Lobbying: to influence political decisions
14
- III - Problematic and contradictionsProblematic and contradictions
15
Our investor baseOur investor base
International, institutional investors: central banks, life insurances, mutual funds, pension funds…
Hedge funds?
International, domestic retail ?
16
Beauty contest or Prudence ?Beauty contest or Prudence ?
Toward Investors: CADES shows no risk as we are in a stable political environment under rational supervision;
Toward Supervisors: CADES reimbursement capacity is volatile, funding level is sensitive;
Toward Press: both risks
17
- IV -Our choices
18
Means of communicationMeans of communication
Road shows: - one to one
- meetings, conferences Website Newsletter Press releases, Press contacts Advertisement Board meetings, Parliament committees, State audit
service
Basic assumption: we don’t target domestic retail investors
19
The rôle of the communication The rôle of the communication agencyagency
CADES has no team dedicated to communication: Need for outsourcing
A specific choice of action due to the scope of activity:
- Interest rates instruments for institutional investors
- limited number of competitors among AAA issuers world
International capabilities: investors lists, acurate press contacts, local logistic
Need to be able to react to news with political consequences
20
-Appendices
21
An active communication program
Web: www.cades.fr
Contact: [email protected]
Bloomberg: CADES <Go>
Reuters: CADESMTS01 CADESMTS02 CADES/T/U/V CADES01-04