(The following statement was released by the rating agency)
LONDON/WARSAW/MOSCOW, April 25 (Fitch) Fitch Ratings has
affirmed the Polish
City of Rzeszow's Long-term foreign and local currency Issuer
(IDR) at 'BBB'. Fitch has also affirmed the National Long-term
'A+(pol)'. The Outlooks are Stable.
KEY RATING DRIVERS
The affirmation reflects a continuation of the city's strong
financial management and the fairly robust performance of the
However, the ratings also factor in projected debt growth for
2014 and 2015, and
the city's still subdued operating results.
Rzeszow's sound management is demonstrated by its ability in
obtaining high EU
and state grants to fund its capital expenditure. EU grants are
finance more than 50% of the city's high capex in 2014-2015 (25%
spending on average). Rzeszow continues to increase the
efficiency of its public
services delivery and has no plans to use any quasi-debt
instruments or to
transfer risk or debt to its dependent entities. As a result, it
contingent liabilities than most of its Polish peers at only
PLN23m at end-2012
(latest available data).
Rzeszow is the economic engine of south-east Poland, with a
and growing private investments in the city's recently expanded
GDP per capita has risen quickly in the Rzeszow sub-region, in
which the city is
located, to 81% of the national average in 2011 from 74% in
2007. Fitch believes
that the city is more prosperous than its surrounding
sub-region. The strong
performance of the local economy continues to support growth of
the city's tax
base and should lead to faster growth of tax revenue than its
together with the city's commitment to cost control, should
efforts to improve its operating results in 2014 and 2015.
Following planned large investments Fitch expects the city's
direct debt to rise
to PLN630m by end-2015 from PLN463m at end-2013. However, at
less than 75% of
current revenue, debt should remain moderate. The city has
obtained a PLN300m
loan from European Investment Bank, which it will deploy for
scheduled for 2014 and 2015. The loan's favourable terms such as
interest rates, a six-year grace period and 25-year maturity for
mean debt service pressure on the budget will be limited.
Fitch expects Rzeszow's operating results to continue to recover
in 2014 and
2015, with the operating margin gradually rising to 8% in 2015
from 5.3% in
2012. This is likely to come from faster growth of operating
revenue and firm
cost control, which should keep operating expenditure growth
revenue growth. In 2013 the city's operating performance
slightly exceeded our
expectations with the operating balance accounting for 7% of
or PLN53.7m in nominal terms (2012: PLN38m).
The city's operating balance should, consequently, more than
debt service requirements, which are likely to average PLN50m
annually in 2014
and 2015. The debt to current balance ratio should stabilise at
years during the same period, slightly higher than 2013's 12
years, but still in
line with the city's long-term debt maturity.
The ratings could be downgraded if Rzeszow's growing debt is not
improvements to operating performance such that the operating
fails to cover debt service for a sustained period.
The ratings could be upgraded if Rzeszow sustains an operating
covers its debt service by 1.5x, accompanied by diminishing
recourse to debt to
finance capital expenditure.
+48 22 330 67 01
Fitch Polska S.A.
16 Krolewska Street
+48 22 338 62 85
+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
States', dated 9 April 2013, are available on
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria -
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