TEXT - S&P affirms Winnipeg's 'AA' ratings

Wed Nov 14, 2012 12:34pm EST

Overview
     -- We are affirming our 'AA' long-term issuer credit and senior unsecured 
debt ratings on the City of Winnipeg. 
     -- In part, the ratings reflect our assessment of the city's healthy 
budgetary surpluses, robust liquidity, and strong economic performance 
compared with that of peers. 
     -- The stable outlook reflects our expectation that Winnipeg's credit 
quality will remain at current levels in the near term, with continued healthy 
budgetary performance, strong liquidity and moderate debt levels.
     -- The outlook also reflects our expectation that the city's economy will 
not deteriorate significantly.

Rating Action
On Nov. 14, 2012, Standard & Poor's Ratings Services affirmed its 'AA' 
long-term issuer credit and senior unsecured debt ratings on the City of 
Winnipeg, in the Province of Manitoba (AA/Stable/A-1+). The outlook is stable.

Rationale
The ratings on Winnipeg reflect Standard & Poor's opinion of the city's robust 
liquidity, stable and highly diversified economy, and healthy budgetary 
performance. We believe an expected increase in debt and limited budgetary 
flexibility offset these strengths somewhat.

While we expect that Winnipeg will draw down its balances moderately as it 
undertakes its capital plan, we believe its liquidity will continue to remain 
strong. At fiscal year-end 2011(Dec. 31)], free cash and liquid assets stood 
at about C$418 million (Standard & Poor's-adjusted) and represented about 6.5x 
annual debt service. In addition, the city had sinking funds that amounted to 
almost C$242.5 million at year-end 2011.

In our view, a well-diversified economic base underpins Winnipeg's lengthy 
record of solid economic performances, which continued in 2011 despite the 
recession's effects that other Canadian municipalities are still feeling. By 
its estimates, real GDP grew about 1.3% in 2011. Labor and construction 
indicators remained stable: The unemployment rate rose modestly, to 5.8% in 
2011 from 5.7% the previous year. In addition, growth in construction activity 
was modest in 2011, as building permit values and housing starts increased 
0.5% and 0.7%, respectively.

In the near term, Standard & Poor's expects that the city's operating 
performance will remain in line with the historical average. Winnipeg had a 
surplus of 13.6% of operating revenues at year-end 2011 (Dec. 31), reflecting 
a modest decline compared with the previous year's 15.4%. The city recorded an 
after-capital deficit of 7.8% of total revenues, which was moderately lower 
than the three-year average deficit of 3.4%. 

We expect consolidated debt levels to rise significantly in the next four 
years as Winnipeg undertakes its capital plan. At fiscal year-end 2011, 
tax-supported debt (Standard & Poor's-defined) remained stable, at a moderate 
43.9% of consolidated operating revenues. Net of sinking fund balances, based 
on our conservative forecasts, we expect consolidated debt to peak at an 
unprecedented 85%-90% of operating revenues by fiscal year-end 2014 as the 
city issues debt to help fund its sizable capital plan.

In our opinion, significant infrastructure renewal requirements moderately 
constrain flexibility. Winnipeg faces an infrastructure deficiency of about 
C$3.5 billion, mainly to address aging roads, transit, facilities, buildings 
and parks. In addition, Manitoba's increased pollution standards and the 
resulting mandate to improve wastewater systems have resulted in an 
accelerated capital program for sewage disposal systems. 

Outlook
The stable outlook reflects our expectation that, in the next two years, 
operating performance will remain in line with historical averages, with 
surpluses well-above 10% of operating revenues, and that liquidity levels will 
remain robust. We also expect that any increases in tax-supported debt will 
not exceed 90% of consolidated operating revenues and that the local economy 
will continue to produce solid results and that population growth rates will 
remain low but positive. A significant increase in tax-supported debt or 
decline in liquidity could exert downward pressure on the ratings. Conversely, 
declining tax-supported debt and notable improvement in its after-capital 
performance could result in a positive rating action. 

Related Criteria And Research
Methodology For Rating International Local And Regional Governments, Sept. 20, 
2010

Ratings List
Ratings Affirmed

Winnipeg (City of)
 Issuer credit rating                 AA/Stable/-- 
 Senior unsecured debt                AA
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