TSA -- Moody's lowers TSA rating to Aa1; outlook remains negative

New York, November 20, 2012 -- Moody's Investors Service downgraded the long-term issuer rating for TSA to Aa1 from Aaa. The rating outlook remains negative. TSA is a holding company of the French government, the largest holding within which is a 27.56% ownership stake (36.8% voting rights) in Thales (A2 negative), a defense electronics contractor with strategic importance to the French State. The downgrade follows the weakening of the French government's credit profile, as captured by Moody's recent downgrade of France's government bond rating to Aa1 from Aaa, with a continued negative outlook. For more details, please refer to Moody's press release (http://www.moodys.com/EUSovereign).

RATINGS RATIONALE

TSA's Aa1 issuer rating reflects application of Moody's Government-Related Issuers (GRI) rating methodology, specifically incorporating its baa2 baseline credit assessment (BCA) equivalent to the BCA of its main holding Thales (GRI-rating A2 negative), the Aa1 rating of the Government of France, and a deemed very high level of support from and very high default dependence with the French government.

TSA has a very modest amount of debt (EUR21 million at 31 December 2011, mostly composed of Titres Participatifs, a preferred stock with no voting rights) and very substantial implicit asset coverage through its investment in Thales (about EUR1.4 billion at 16 November 2012). Moreover, the government of France is incented and is expected to ensure that TSA continues to meet its (modest) financial obligations in order to protect its voting rights and golden share in Thales, whose surveillance and detection products are also deemed strategically important to the government. Despite the absence of an explicit guaranty, Moody's expects the French government will manage TSA in a manner that enables TSA to meet its financial obligations.

Cash is about equal to debt and we expect at least an approximation of this relationship to continue. Debt service is supported by cash flow in the form of a dividend from Thales and modest investment returns on the cash balances. Notwithstanding reductions approximating 45% to 50% in Thales dividends paid to TSA over the 2010-2011 timeframe (as restructuring activities and cash conservation have taken on added importance at Thales), requisite debt service payments have still been comfortably satisfied. The primary asset of TSA is a 27.56% ownership interest (36.8% voting rights) in Thales (including Sofivision), with a publicly traded market value of about EUR 1.4 billion. Excess cash flow from the Thales dividend, after debt service, is distributed to the French state via dividend outflows.

Default dependence is very high. Although TSA maintains cash roughly equal to debt and the value of its assets substantially exceeds its liabilities, there are no explicit restrictions on cash usage or the sale of assets.

Support from the government is very high. We anticipate the French government will act to ensure that TSA will continue to meet its financial obligations. In addition to reputational risk, France is incented to protect its voting rights and golden share in Thales as the surveillance and detection products developed therein are strategically important to the government.

The negative rating outlook is in line with that for the government of France due to the very high level of deemed default dependence.

The issuer rating would come under pressure if the sovereign rating for the government of France is lowered further, or if our view of the support factors underlying the GRI methodological approach to assigning this rating changed in any way. Alternatively, the issuer rating could be raised (and/or the outlook could be stabilized) if the sovereign rating for the government of France is upgraded (and/or stabilized). Any upgrade and/or stabilization of the outlook would be based on the expectation that there would be no change in either the purpose of TSA or the government's ownership.

The principal methodology used in rating TSA was the Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include the Government-Related Issuers: Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

TSA, headquartered in Paris, France, is wholly-owned by the French government for the principal purpose of holding investments in Thales and Technicolor (formerly Thomson s.a.).

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Russell Solomon Senior Vice President Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Michael J. Mulvaney MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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