The Caisse de dépôt et placement du Québec’s $13.2 billion holdings in third-party asset-backed commercial paper(ABCP)is not a risk to its credit profile, says DBRS.

The credit rating agency notes “that the ABCP position will dampen returns due to the provisions to be taken against the holdings” but it nonetheless remains manageable because of three factors:

• the Caisse’s large investment portfolio, totaling $207 billion at year-end 2006;

• its substantial liquidity position, comprising high-quality and highly liquid fixed-income assets, used as backup liquidity for CDP Financial Inc.’s commercial paper program; and

• its track record of asset diversification and solid investment returns(12% to 15%)since its reorganization in 2002, well above the 7% return requirement of depositors, providing a significant cushion against a market downturn.

“Furthermore,” says DBRS, “recourse debt remains fairly low, at less than 4% of net assets, while the overall liquidity needs of depositors are manageable, with contributions expected to continue to exceed withdrawals for some time.”

The Caisse and CDP Financial are rated R-1(high)and AAA, the highest ratings granted by credit rating agency.

Last week, the Caisse announced its ABCP exposure during a hearing before the Public Finance Committee of the National Assembly of Québec.

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