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
- Insight: How U.S. spying cost Boeing multibillion-dollar jet contract
- Exclusive: Secret contract tied NSA and security industry pioneer |
- With Fed out of the way, what's next on Wall Street?
- Yemeni al Qaeda says attack on hospital was mistake
- Insight: For Chinese farmers, a rare welcome in Russia's Far East