S&P Assgns AAA & A-1+ Rtgs to Riseau Ferri de France.

LONDON--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/30/97--Standard & Poor's has today assigned its triple-'A' long-term and short-term 'A-1+' credit ratings to Riseau Ferri de France (RFF). The long-term rating outlook is stable. The credit ratings apply to senior obligations of RFF denominated in French francs or in other currencies.

The ratings are based on the support of the Republic of France for the financial obligations of RFF, the 100%-state-owned proprietor of the French national railway infrastructure. The very high degree of sovereign support reflects RFF's legal status as an Etablissement Public Industriel et Commercial (EPIC), which confers on its obligations the ultimate guarantee of the Republic of France, as well as the economic importance of the country's rail system.

RFF was created in February 1997 by rail sector reform legislation (Law No. 97-135) that took effect retroactively to the beginning of the year. This legislation transferred ownership of France's network infrastructure to RFF from the triple-'A' rated French national railroad company Sociiti Nationale des Chemins de Fer Frangais (SNCF), which is also an EPIC with the French state as sole owner. Several statutory decrees, issued in May 1997, implemented Law No. 97-135 by defining RFF's public service mission, organizational structure and external oversight arrangements, as well as the general framework for determining network access charges. SNCF continues to supply practically all passenger and freight transport services on France's surface railways, and undertakes infrastructure management and maintenance on behalf of RFF. The sectoral reform thus separated network ownership from transport services provision and system operation. RFF has now assumed responsibility for financing existing and future infrastructure assets, and also for railroad investment policies and project design.

Under provisions of Law No. 97-135, the rail infrastructure asset transfer is offset by RFF's long-term financial liability to SNCF in the amount of FFr 134.2 billion ($22.4 billion). Interest and amortization payments on this liability match debt service costs and scheduling for a corresponding amount of SNCF's obligations outstanding at January 1st, 1997. Pending initiation of its debt-issuance program, RFF's financing has consisted of short-term advances from the French Treasury and from SNCF, due for repayment by the year-end 1997. Management anticipates that fixed investments attributable to RFF in 1997 will amount to about FFr 13.3 billion, and that the net borrowing requirement for the company's first year in existence (excluding reimbursement of the above-mentioned temporary advances) will total approximately FFr 13 billion.

With a quite small staff, RFF's main operating cost will consist of subcontracting compensation to SNCF for running the rail network. Current income will derive from network access charges collected from SNCF (set at FFr 6 billion per year in 1997 and 1998) and from government subsidies for infrastructure maintenance and renewal, which are expected to remain at the present annual level of FFr 11.8 billion. Additionally, RFF is entitled to proceeds from sales of real estate assets in its domain, and is to receive over FFr 10 billion of capital grants in 1997 from France's central and local governments.

OUTLOOK: Stable

Despite a significant increase in state capital grants for the rail transport sector accompanying this year's sectoral reform, RFF's role as the financing vehicle for railroad infrastructure implies substantial and prolonged debt accumulation going forward. However, strong support by the Republic of France should underpin very high credit quality over the foreseeable future, Standard & Poor's said.---CreditWire

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Jeanne-Frangoise de Polignac, Paris (33) 1-4420-6660.

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Susan Witt, Paris (33) 1-4420-6661

Jeanne-Francoise De Polignac, Paris (33) 1-4420-6660

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