(The following statement was released by the rating agency)
LONDON/WARSAW/MOSCOW, May 23 (Fitch) Fitch Ratings has affirmed
the Polish City
of Torun's Long-term foreign and local currency Issuer Default
Ratings (IDR) at
'BBB' and its National Long-term rating at 'A(pol)'. The
Outlooks are Stable.
KEY RATING DRIVERS
The affirmation reflects the City of Torun's strong operating
results in 2013
and, consequently, its healthy debt service and debt coverage
ratios. In Fitch's
view, the city's operating performance will continue to be
supported by prudent
financial and strategic management. The ratings also factor in
high debt following capital expenditure, and expected growth in
the debt of the
city's public sector companies. The ratings further take into
pressure on the city's operating expenditure.
Fitch expects Torun's operating balance to average PLN115m in
13%-14% of operating revenue, which should be sufficient for
Since 2011 the city's operating results have been improving. The
margin rose further to 14.7% in 2013, from 13.7% in 2012. The
ratio also improved to 10 years in 2013 from 12 years in 2012
operating balance covered debt service by 1.2x.
Fitch takes a positive view of the city's financial and
particularly its long-term financial projections, and its
monitoring of both
market conditions and budgetary execution. Torun's authorities
have taken steps
to control costs, to increase its revenue generation capacity
through local tax
policies and to acquire EU grants for investment. However, the
investment policy has resulted in its high indebtedness.
In 2014 the city will make final payments for a completed bridge
Torun's most costly investment. Fitch expects the city's debt to
around 116% of current revenue for 2014 and 2015. The city's
performance should keep debt coverage in line with its average
estimated at 14 years for 2014 and 2015. The city is exposed to
risk as 98% of Torun's debt carries floating rates. However,
Fitch believes such
risks should be kept manageable by the city's prudent budgetary
Indirect risk is expected to grow in 2014-2015 as a result of
companies' investments. Fitch forecasts indirect debt to rise to
PLN460m in 2015
from PLN261m in 2013. Torun will support the companies' debt
capital injections upon completion of the investment project,
and these figures
would have already been included in the city's multiyear
As with other Polish subnationals, Torun has been facing
pressure to increase
its operating expenditure. This is driven mainly by under-funded
responsibilities transferred to local governments by the state
and by rigid
spending that is dominated by education and social care.
Torun, with 200,000 inhabitants, is located in the
Kujawsko-Pomorskie Region. In
2011 the Bydgosko-Torunski sub-regional gross regional product
per capita was
105.5% of the national average.
The ratings could be downgraded if operating performance
direct debt exceeds Fitch's projections, leading to stressed
debt service and
debt coverage ratios, with the operating balance insufficient
for debt service.
The ratings could be upgraded if the city reduces its direct and
after completion of the municipal companies' investments, while
strong operating performance.
+48 22 330 62 85
Fitch Polska S.A.
16 Krolewska Street
+48 22 330 67 01
+7 495 956 9901
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',
dated 23 April
2014, are available on www.fitchratings.com.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria -
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