(The following statement was released by the rating agency)
LONDON/WARSAW/FRANKFURT, June 06 (Fitch) Fitch Ratings has
affirmed the Polish
City of Zabrze's Long-term foreign and local currency Issuer
(IDR) at 'BB+' and its National Long-term rating at 'BBB+(pol)'.
KEY RATING DRIVERS
Zabrze's ratings reflect the city's tight liquidity and low
flexibility as debt approaches the new borrowing limit from
2014. The ratings
further reflect the growing debt of Zabrze's public-sector
Positively, the ratings also take into account Fitch's
expectations that its
operating performance will rebound in 2014-2015, with its
sufficient to cover debt service.
For 2014-2015 Fitch expects Zabrze to report an operating margin
at 7%-8% after
2013 results were weakened by a shift of revenue (mainly current
2014. The city authorities will continue to balance the need to
invest both to
attract business and improve living standards with gradual
rising of local tax
rates. Expected recovery of the national economy in 2014 should
also support the
city's operating revenue.
The city's direct debt will peak at PLN308m in 2014 and
This figure does not take into account investments co-financed
from EU funds
under the new EU budget for 2014-2020. Zabrze's debt service
will increase to
PLN42m in 2015 from PLN38m in 2014 and PLN34m in 2013. We expect
to remain at seven to eight years, close to the city's weighted
maturity of seven years. We also expect the operating balance to
service by 1.1x in 2014-2015.
Fitch expects the city's liquidity to marginally recover in
2014-2015 from its
low levels in 2013. We also expect Zabrze to frequently tap its
credit line of PLN30m as it did in 2013.
Zabrze's flexibility to incur additional debt may be constrained
government's new formula for borrowing limits. Under the new
formula the city's
individual limit calculated for 2014-2015 has to take into
current balances, which for Zabrze included weaker operating
2011-2013. This may affect the city's borrowing capacity. Fitch
debt to be 45% of current revenue in 2014-2015, compared with
44% in 2013.
Indirect risk will peak in 2015 at PLN244m as a result of
investments. This will mainly be driven by the financing of the
second stage of
the waste and sewerage project by the city's company ZPWiK and
the bonds issued
by the Stadium (SPV) for reconstructing the city's football
the risk resulting from ZWPiK project is low due to the
Zabrze's payments relating to the stadium project (comprising
liabilities towards a domestic bank's equity in a SPV and
capital transfers to
the SPV for bond redemption) are calculated at about PLN21m
2014-2026 and those figures have been included in the city's
Improvement of operating performance on a sustained basis with
at 8%-9% coupled with direct risk stabilisation at 55% of
current revenue would
lead to an upgrade of ratings.
The ratings could be downgraded if the operating margin falls
below 2%, leading
to debt coverage exceeding 20 years and/or direct risk growth
above 55% of current revenue.
+48 22 330 62 85
Fitch Polska S.A.
16 Krolewska Street
+48 22 338 62 96
+49 69 7680 76 111
Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
email@example.com; 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 -
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH