PARIS/LONDON, February 07 (Fitch) Fitch Ratings has affirmed the
City of Paris's
Long-term local and foreign currency Issuer Default Ratings
(IDR) at 'AA+' with
Stable Outlooks and Short-term foreign currency IDR at 'F1+'. A
full list of
rating actions is below.
The ratings are underpinned by Paris's sound budgetary
fiscal flexibility, moderate debt and key position as the
political and economic
capital of France (AA+/Stable/F1+). The Stable Outlooks
highlight Fitch's base
case forecast of lower budgetary margins in the medium term,
with the current ratings.
KEY RATING DRIVERS
Paris's revenue flexibility is underpinned by moderate household
compared with major French cities. Tax base growth is also
supported by the
strength of the local economy. This potential revenue
flexibility mitigates the
risks linked to cuts in transfers from the state and the
relative rigidity of
many operating spending items (staff, equalisation
Fitch expects weaker budgetary performance in 2013, as operating
estimated to have stalled due to a significant drop in real
duty. We estimate operating expenditure growth remained moderate
control of staff costs and social spending helped mitigate the
in payments to equalisation funds. The current margin is
expected to have
declined to 7.4% of current revenue, from 9.6% in 2012.
Assuming a strong rise in equalisation payments by the city and
transfers from the state, operating spending could outpace
revenue in the medium
term. Based on a stable fiscal and policy framework, we believe
result in a current margin below 5% by 2016. However, the
outcome of the 2014
municipal election and the evolution of local authorities'
framework will be taken into account when we update our forecast
Capital expenditure self-financing is high, estimated at 60.4%
in 2013 after
debt repayment. We expect it to stabilise in our base case
forecast, notably due
to a steady level of asset sales, at an average of EUR200m per
year until 2016.
We believe Paris's large portfolio of disposable assets is a key
strength, as it could help limit debt financing in the future.
Debt is moderate relative to peers, although we estimate it rose
to 45% of
current revenue in 2013 due to a peak in capital expenditure at
Assuming average annual capital expenditure of EUR1.4bn from
2014 to 2016, we
believe debt could account for about 55% of current revenue in
2016. The debt
payback ratio is sound but could deteriorate according to our
from an estimated 6.2 years in 2013 to above ten years in 2016.
strong thanks to reliable and well-diversified funding sources,
flows and prudent debt management.
Guaranteed debt is high at 107% of current revenue. We consider
it low risk as
it essentially relates to long-term regulated loans taken on by
social housing entities. Paris also has numerous dependent
entities, which are
tightly supervised and mostly self-funded.
Paris is one of the wealthiest and most productive cities in
Europe. Its economy
structurally performs better than the French economy, which is
expected to grow
slowly in the medium term.
Paris has the largest and one of the most sophisticated local
France. We consider that its advanced management and control
its capacity to effectively implement its financial strategy.
A downgrade of France or a debt payback ratio consistently above
10 years would
result in negative rating action.
Positive rating action on France's sovereign rating could be
mirrored by Paris's
ratings, provided that Paris maintains a stable operating
performance and debt
The rating actions are as follows:
- Long-term foreign and local currency IDR: affirmed at 'AA+';
- Short-term IDR: affirmed at 'F1+'
- EUR4bn EMTN programme: affirmed at 'AA+'/'F1+'
- EUR800m billets de tresorerie programme: affirmed at 'F1+'
- Senior unsecured notes: affirmed at 'AA+'
+33 1 44 29 91 45
Fitch France S.A.S.
60, rue de Monceau
+33 1 44 29 91 34
+39 02 07 90 87 203
Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22,
email@example.com; Peter Fitzpatrick, London, Tel:
+44 20 3530
1103, Email: firstname.lastname@example.org.
Additional information is available on www.fitchratings.com
Applicable criteria, "Tax-Supported Rating Criteria", dated 14
"International Local and Regional Governments Rating Criteria
States", dated 9 April 2013 on www.fitchratings.com.
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