(The following statement was released by the rating agency)
LONDON/WARSAW/FRANKFURT, June 13 (Fitch) Fitch Ratings has
affirmed the Polish
City of Warsaw's National Long-term rating at 'AAA(pol)' with a
Fitch has also affirmed the National Long-term rating of the
city's PLN4bn bond
programme and all bonds issued under it at 'AAA(pol)'.
KEY RATING DRIVERS
The affirmation reflects improvement in the city's operating
following measures to curb operating expenditure growth, and the
liquidity buffer supporting debt service. The ratings also take
into account the
city's wealthy and diversified economy, a strong tax base, and
stabilisation of direct debt in 2014-2016. It also reflects
growth of the city's
Fitch expects the city to maintain its operating performance at
about 7% of
operating revenue, which will be below 2013's 9.7%, but still
above the 5.3%
average over 2010-2013. This will be driven by operating
expenditure cuts, as
evidenced by changes implemented in its budgetary process, and
growth through expected economic expansion.
Fitch forecasts Warsaw's direct debt for 2014-2016 to remain
moderate, at about
50% of current revenue. Fitch takes a positive view of Warsaw's
management. The agency expects the city's annual capex to reach
in 2014 (17%-20% of total spending), from PLN1.9m in 2013 before
investments co-financed from the 2007-2013 EU budget taper off.
The majority of
this capex will be financed by capital revenue (including EU
funding) and the
current balance, limiting the city's debt financing needs.
In May 2014 the city repaid its EUR200m eurobonds using
temporarily reducing its outstanding debt to PLN5bn (below 45%
current revenue for 2014), and at the same time eliminating its
exposure. The city's liquidity buffer has remained strong at
benefitting from improved income tax revenue, asset sales and
pay-out from the city's public sector entities.
Fitch expects liquidity to be partially absorbed by capex in
should remain above PLN700m. For 2013 the city had on average
PLN1.7bn of free
cash available on its accounts, which covered annual debt
service by 3x. Due to
the city's high cash levels, net direct debt was only PLN4.1bn
at end-2013 or
37% of current revenue.
Due to the investments of municipal companies, Fitch expects the
debt to rise to about PLN2.7bn in 2015 from PLN2.5bn in 2013.
The city supports
essential projects mostly through long-term service agreements,
mainly with its
public transport companies. This may create considerable
pressure on operating
expenditure and limit the city's budget flexibility in the long
The city's diversified and wealthy economy, with a gross
regional product per
capita at more than 3x the national average, results in high tax
revenue for the
city's budget (37% of operating revenue in 2013). However, this
also exposes the
city to economic cycles, which is exacerbated by payments made
equalisation mechanism. Fitch expects the city's tax revenue to
2014-2015, supported by forecast GDP growth of 3% per year.
Sustained deterioration of operating performance below 2012
with a declining cash buffer, and/or debt growth far exceeding
lead to a negative rating action.
+48 22 330 67 01
Fitch Polska S.A.
16 Krolewska Street
+48 22 338 62 85
+49 69 768 076 111
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
firstname.lastname@example.org; Malgorzata Socharska,
Warsaw, Tel: +48 22
338 62 81, Email: Malgorzata.Socharska@Fitchratings.com.
Additional information is available on www.fitchratings.com.
Applicable criteria, 'Tax-Supported Rating Criteria', dated 14
August 2012, and
'International Local and Regional Governments Rating Criteria
States', dated 23 April 2014, are available on
Note to Editors: Fitch's National ratings provide a relative
creditworthiness for rated entities in countries with relatively
international sovereign ratings and where there is demand for
such ratings. The
best risk within a country is rated 'AAA' and other credits are
relative to this risk. National ratings are designed for use
mainly by local
investors in local markets and are signified by the addition of
for the country concerned, such as 'AAA(pol)' for National
ratings in Poland.
Specific letter grades are not therefore internationally
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria -
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