S&P Affirms Casiopea Re ‘A’ Rating

April 28, 2005

The Paris office of Standard & Poor’s Ratings Services announced that it has affirmed its “A” long-term counterparty credit and insurer financial strength ratings on Casiopea Re S.A., the wholly owned Luxembourg-based reinsurance affiliate of Spanish telecommunications provider Telefónica S.A. (rated A/Negative/A-1).

S&P also removed the ratings from CreditWatch, where they had been placed with negative implications on April 1, 2005 (See IJ Website, April 4,2005). The rating outlook remains negative.

“The rating action follows today’s affirmation and removal from CreditWatch of the ratings on Telefónica,” stated S&P credit analyst Virginie Crepy. “It follows Telefónica’s update on its medium-term financial policy and announcement that it has pulled out of the bid process to purchase Türk Telekom.”

S&P added that the “ratings on Casiopea Re are based on its status as the captive reinsurer of Telefónica under Standard & Poor’s ratings criteria, and, as such, are driven by the ratings on the parent. As the captive reinsurer of the Telefónica group, Casiopea Re forms an integral part of Telefónica’s overall risk management strategy.

“The negative outlook on Casiopea Re is driven by that on its parent, and reflects the possibility of a downgrade if Telefónica does not show quick progress in reducing its ratio of net debt to EBITDA to 2x at the consolidated level and to below 2.5x at the parent level by year-end 2005.”

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