A decision by CIF to remain silent on the reasons for a trading suspension of its bonds was taken after rating agencies responded to the move by reviewing the group’s ratings, officials at CIF Euromortgage said after the suspension was lifted yesterday (Thursday).

Trading in CIF Euromortgage’s obligations foncières and bonds issued by Caisse Centrale du Crédit Immobilier de France (3CIF) was suspended on 8 May at the behest of France’s Autorité des Marchés Financiers and until the CIF group released a statement this Tuesday no official explanation for the regulator’s move had been forthcoming.

Speculation as to the reasons behind the suspension centred on reports that CIF’s auditors had been unable to sign off on its accounts for 2011 on a going concern basis after Moody’s on 15 February put 3CIF’s rating on review for downgrade, with a cut of up to four notches possible. This has now been confirmed by CIF officials.

“AMF’s decision was a precautionary, temporary measure,” a CIF spokesperson told The Covered Bond Report.

CIF then prepared a statement explaining this for release after AMF’s move, but refrained from releasing it after the rating agencies contacted CIF to say that they would be reviewing its ratings.

The lack of any communication from the CIF group during the trading suspension was strongly criticised by several market participants, but CIF defended its position.

“Rightly or wrongly, we decided not to publish the communique but to wait to know better about the decisions of the rating agencies,” said CIF’s spokesperson. “I believe it was not the worst option, even if we understand that it was difficult for investors.”

Fitch and Moody’s subsequently affirmed 3CIF’s ratings, taking comfort from statements from the French authorities demonstrating strong support for the group. Fitch lowered 3CIF’s standalone rating but maintained its issuer rating and improved the status from negative to stable, while Moody’s lowered the standalone rating but affirmed its issuer rating, on negative review, incorporating 12 notches of uplift to reflect its expectations of state support.

CIF’s auditors were subsequently able to sign off on its 2011 accounts on a going concern basis, allowing for the lifting of the trading suspension and the release of the group’s statement. Their results are due to be published by the end of the month.

“Both 3CIF and CIF Euromortgage have taken note of the Group’s decision to amend its business model, which recently came under sharp criticism from the rating agencies,” said CIF in its statement. “The Group has mandated an investment bank [HSBC] to search for a long term solution.

“Priority will be given to the sale of an ownership interest to an outside institution.”

Market participants welcomed the developments.

“While the press release did not name any potential buyer, it will be viewed positively by the market that the issuers are finally able to publish their reports and that trading has resumed,” said RBS analysts yesterday. “We expect that CIF Euromortgage spreads will continue to tighten from the peak levels (though spread volatility will probably be high given the lack of information which opens up the room for wild speculation in the press).”

However, CIF Euromortgage spreads were said to be relatively unchanged this (Friday) morning, with a syndicate official saying that they are still around the 140bp-150bp area, some 40bp-50bp wider than their French peers (with the exception of Dexia).

“The statement has at least helped subside the panic,” he said, “but we have yet to see any particular rush of interest in picking up their bonds at these levels, even if no-one really sees any default risk in the bonds given that some sort of shotgun marriage is expected.”