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Feb 04 - Fitch Ratings has affirmed Network Rail Infrastructure Finance Plc's (NRIF) GBP40bn multi-currency note issuance programme at 'AAA' and its GBP4bn short-termcommercial paper (CP) issuance programme at 'F1+'. The Outlook on the note programme isNegative.
The Negative Outlook reflects that on the UK's Long-term Issuer Default Rating ('AAA'/Negative).
NRIF's ratings are linked to the UK's ratings due to the Financial Indemnity (FI) from the Secretary of State for Transport (SoS), whose liabilities are sovereign obligations of the UK. The FI is an unlimited, irrevocable and unconditional obligation terminating on 3 October 2052.
Under the FI, the SoS has up to 20 days to meet a claim relating to a note principal repayment, and up to five days to meet a claim relating to a note interest payment or, following the side letter implemented on 19 March 2012, a CP principal payment. The FI states that should NRIF have insufficient cash to cover an upcoming note or CP-related obligation, either the programme administrator or security trustee is required to submit a claim under the FI to the SoS 21 days or six days prior to the obligation arising for principal and interest obligations respectively. As such, Fitch is comfortable that the structural support provided by the SoS is sufficient to ensure full alignment of NRIF's ratings with those of the UK sovereign.
In order to reduce financial counterparty risk related to the account bank, HSBC Bank plc (HSBC, 'AA-'/Stable/'F1+'), NRIF enters into repurchasing (repo) agreements with the bank. Under these agreements, prefunded bond redemption amounts deposited by NRIF with HSBC are secured by high quality, liquid government/supra-national debt security collateral posted by the bank, such as UK Gilts or US Treasury Bonds, and posted collateral is marked-to-market on a daily basis. Fitch considers that this mechanism would significantly reduce counterparty risk if HSBC's creditworthiness deteriorates in the future.
Fitch may have provided another permissible service to the rated entity or its related third parties. Details of this service can be found on Fitch's website in the EU regulatory affairs page.
