TEXT-Fitch revises Polish Mazowieckie Region outlook to negative

Oct 31 - Fitch Ratings has revised the Outlook on the Polish Region of
Mazowieckie's Long-term ratings to Negative from Stable. The agency has also
affirmed the Long-term foreign currency at 'BBB+', Long-term local currency
rating at 'A-' and National Long-term rating at 'AA(pol)'.

The revision of the Outlook reflects the expected deterioration in the region's
operating performance in 2012 following its significant exposure to downward
changes in the macroeconomic environment and the high indirect risk resulting
from the health care sector's difficult financial situation. The Negative
Outlook takes into consideration the growing and already high indebtedness of
the railway company Koleje Mazowieckie (KM) and the region's limited flexibility
to incur new debt as it is already approaching borrowing limits.

The ratings could be downgraded if the region's operating balance is lower than
the annual debt service and the overall risk (including the risk of the health
care sector) increases above the 2011 level.

The high share of corporate income tax (CIT) at about 66% of operating revenue
makes the region highly dependent on changes in the macroeconomic environment.
The region's CIT revenue may be about PLN100m lower than projected following the
lower GDP growth forecast for Poland for 2012. The region's limited flexibility
to further cut operating expenditure will not compensate for the possible fall
in CIT. The fall may reduce the region's operating balance, worsen its
self-finance ability of investments and lead to lower liquidity, putting
pressure on the region's debt.

The region has been approaching the legal borrowing limit, leaving it with
little ability to incur new debt. Fitch projects that the debt level may not
exceed PLN1.5bn by end-2012. The debt repayment schedule does not foresee
principal repayments in 2012. Of the PLN80m of interest to be paid in 2012, the
region still has to pay a low PLN22m in December 2012.

The highly indebted health care sector will need persisting financial support
from the region in the form of guarantees and to a high extent, non-refundable
loans. Fitch expects the sector will put further pressure on the region's budget
due to the new healthcare legislation. Moreover, a high risk for the region's
budget stems from KM's debt (refinancing risk of the EUR100m notes due in 2016)
and the planned large investments in 2013-2015. The region is also obliged to
cover KM's FX risk in relation to the EUR100m notes.

Mazowieckie has 5.2 million inhabitants and is Poland's richest region. In 2009
Mazowieckie's gross regional product accounted for 21.9% of Poland's GDP.

Additional information is available on www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable criteria, 'Tax-Supported Rating Criteria' dated 14 August 2012 and
'International Local and Regional Governments Rating Criteria outside United
States' dated 17 August 2012 are available at www.fitchratings.com

Note to Editors: Fitch's National ratings provide a relative measure of
creditworthiness for rated entities in countries with relatively low
international sovereign ratings and where there is demand for such ratings. The
best risk within a country is rated 'AAA' and other credits are rated only
relative to this risk. National ratings are designed for use mainly by local
investors in local markets and are signified by the addition of an identifier
for the country concerned, such as 'AAA(pol)' for National ratings in Poland.
Specific letter grades are not therefore internationally comparable.

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria - Outside the
United States