-- We lowered our sovereign ratings on Spain to 'BBB-/A-3' from
'BBB+/A-2' and assigned a negative outlook to the long-term rating on Oct. 10,
-- We cap the ratings on the Spanish cities of Barcelona and Madrid at
the level of the long-term sovereign rating because, under our criteria, these
two local and regional governments (LRGs) do not meet the conditions to be
rated higher than the sovereign.
-- Consequently, we are lowering our long-term ratings on these two LRGs
to 'BBB-' from 'BBB+' and lowering our short-term rating on Madrid to 'A-3'
-- The negative outlooks on the two LRGs reflect the negative outlook on
On Oct. 17, 2012, Standard & Poor's Ratings Services lowered its long-term
issuer credit ratings on the Spanish City of Barcelona (Barcelona) and City of
Madrid (Madrid) to 'BBB-' from 'BBB+'. We have also lowered our short-term
issuer credit rating on Madrid to 'A-3' from 'A-2'. The outlooks on the
long-term ratings on the two local and regional governments (LRGs) are
The downgrades reflect a similar action on Spain on Oct. 10, 2012 (see "Spain
Ratings Lowered To 'BBB-/A-3' On Mounting Economic And Political Risks;
Outlook Negative," published on RatingsDirect on the Global Credit Portal).
We cap our ratings on the cities of Madrid and Barcelona at the level of the
long-term rating on Spain. This reflects our view that the cities do not meet
the criteria under which we would rate a LRG higher than its sovereign (see
"Methodology: Rating A Regional Or Local Government Higher Than Its
Sovereign," published Sept. 9, 2009).
Under these criteria, an LRG can be rated higher than its sovereign only if it
can maintain credit characteristics that are more resilient than the
sovereign's in a stress scenario, has a predictable institutional framework
that limits central government's interference, and displays high financial
flexibility. At this stage, we believe that neither Madrid nor Barcelona
display these characteristics.
We will review the indicative credit level (ICL) of Barcelona and Madrid as
soon as we have new relevant information to assess their individual credit
profiles, in accordance with our criteria for rating LRGs. The ICL is not a
rating but a means we use to assess the intrinsic creditworthiness of an LRG
under the assumption that there is no sovereign rating cap. The ICL results
from the combination of our assessment of an LRG's individual credit profile
and the institutional framework where it operates.
The negative outlooks on the long-term ratings on the cities of Barcelona and
Madrid reflect that on Spain, since we do not rate Spain's local governments
above the sovereign, according to our criteria.
Related Criteria And Research
-- Spain Ratings Lowered To 'BBB-/A-3' On Mounting Economic And Political
Risks; Outlook Negative, Oct. 10, 2012
-- Methodology For Rating International Local And Regional Governments,
Sept. 20, 2010
-- Methodology: Rating A Regional Or Local Government Higher Than Its
Sovereign, Sept. 9, 2009
Madrid (City of)
Issuer Credit Rating BBB-/Negative/A-3 BBB+/Negative/A-2
Senior Unsecured BBB- BBB+
Barcelona (City of)
Issuer Credit Rating BBB-/Negative/-- BBB+/Negative/--
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left