Approval by the European Commission last Wednesday of French government guarantees for Crédit Immobilier de France (CIF) are credit positive for the bank and also covered bonds of CIF Euromortgage, Moody’s said yesterday (Monday).

The EC approved the French government’s plan for the orderly resolution of CIF, including provision of up to Eu28bn of government guarantees for up to 20 years, noted Moody’s, with this being conditional upon CIF generating no new business and being wound down.

“The approval, which means that the plan is compatible with the European Union’s (EU) state aid rules, is credit positive for CIF’s debtholders because it makes permanent a temporary state guarantee in place since September 2012,” said the rating agency. “Moreover, the aid guarantees that all secured and unsecured creditors will be repaid, absent major losses in the bank’s loan book.”

Moody’s also said the EC approval is credit positive for CIF Euromortgage obligations foncières.

“The EC endorsed the view that the failure of this entity could spill into the entire market,” it said. “The guarantee covers CIF Euromortgage’s deposits at 3CIF (either in cash deposits or certificates of deposit), which account for 23% of the cover pool.

“It also supports CIF’s covered bonds because the guaranteed debt that CIF issues during the run-off will help refinance CIF Euromortgage’s maturing covered bonds.”