(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: City of Bialystok â€“ Rating
WARSAW/PARIS, July 25 (Fitch) Fitch Ratings has revised Polish
Bialystok's Outlook to Positive from Stable and affirmed its
and local currency Issuer Default Ratings (IDR) at 'BBB-' and
rating at 'A(pol)'.
KEY RATING DRIVERS
The Outlook change reflects the following key rating drivers and
Fitch expects Bialystok's operating performance to continue
improving and direct
debt to fall.
Pressure on costs due to new infrastructure is mitigated by the
prudent approach to spending. The ratings also factor in the
capacity of investments, provided that the sale of the city's
MPEC is successful.
Fitch expects Bialystok's operating performance to further
improve due to its
prudent budgeting practice and continuous opex rationalisation
operating margin is forecast by Fitch to rise to about 11% by
2017 from 9.2% in
2013. We expect the operating balance to average PLN140m
annually in 2014-2017
and exceed 1.4x the average debt service during this period. In
Bialystok's operating performance improved by more than Fitch's
with the operating balance sufficient to cover debt service.
Fitch expects Bialystok to continue its long track record of
high capex in
2014-2017, mainly on roads and public transport. Capital
expenditure is likely
to average PLN330m annually or 20% of total expenditure. Fitch
capital revenue will finance on average 80% of capex, with the
from the current balance. Expected sales proceeds from MPEC
(PLN260m) and EU
capital grants will make up most of the city's capital revenue.
If the sale of MPEC is successful Bialystok would be reporting a
debt variation in 2014, a year ahead of schedule. Unlike in
2013, investments in
2014-2017 will be financed entirely from the current balance and
as the city's policy is to refrain from incurring new debt.
Subject to a successful MPEC sale, Bialystok's direct debt will
PLN470m or 30% of current revenue by end-2017 from PLN757.3m in
2013 (63%). Part
of the proceeds from the MPEC sale would be used for early
repayment of PLN30m
of bonds in 2014. Even without the MPEC sale, debt is likely to
about 50% of current revenue by 2017.
Fitch expects Bialystok's indirect risk to peak at PLN408m in
2015 from PLN198m
in 2013. This is due to the PLN164m loan financing of a solid
plant built by PUHP Lech Sp. z o.o.. When construction is
complete at end-2015,
the company should be able to repay the debt itself, limiting
the risk to
Bialystok's budget. The city would also be providing support of
up to PLN11m
annually in 2014-2029 for the repayment of debt raised for a
The ratings could be upgraded if the city maintains its
with an operating balance of at least 9% of operating revenue
and sufficient to
fully cover debt service.
The Outlook could be changed to Stable if operating performance
weakens with the
operating balance insufficient to cover debt service and/or if
significantly exceeds Fitch's projections.
+48 22 338 62 96
Fitch Polska S.A.
16 Krolewska Street
+48 22 330 67 01
+33 1 44 29 91 34
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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