December 22, 2017 / 9:07 PM / in a year

Fitch Rates Polish City of Rybnik 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: City of Rybnik - Rating Action Report here WARSAW/LONDON, December 22 (Fitch) Fitch Ratings has assigned the Polish City of Rybnik a Long-Term Local-Currency Issuer Default Rating (IDR) of 'BBB+'. The Outlook is Stable. At the same time Fitch has affirmed Rybnik's National Long-Term Rating at 'AA+(pol)' with Stable Outlook. The action reflects our unchanged view of the city's sound operating performance and the low direct debt. Although the latter is expected to rise, it will not negatively affect the city's debt service and debt payback ratios. The ratings also take into account the potential refund of property tax to a coal mine, which will be absorbed by the city's strong liquidity. KEY RATING DRIVERS The ratings reflect the following key rating drivers and their relative weights: HIGH Debt, Liabilities and Liquidity - Strength: Rybnik has repaid nearly all its existing debt in 2017. At end-November, with the full redemption of bonds, debt has fallen to a low PLN5 million from PLN21.3 million at end-2016. However, in December, the city drew the first tranche of PLN80 million under its loan agreement with European Investment Bank (EIB) and we expect direct debt to reach PLN85 million or close to a still low 12% of current revenue at end-2017. We also expect the debt payback ratio to remain at a low 1.2 years (2016: 0.3 years). To finance planned investments for 2017-2020 totalling PLN740 million (on average 21% of total expenditure annually), Rybnik has secured financing with an EIB loan of up to PLN267 million. We expect Rybnik's debt to peak at PLN190 million by end-2020 but remain below a moderate 30% of current revenue. Its debt payback ratio should remain strong and be no more than four years over the medium term. Main investment is the construction of the regional expressway with a ring-road in Rybnik (costing about PLN460 million). Fiscal Performance - Neutral: We project Rybnik to maintain an operating margin of about 10% in 2017-2019, driven by expected growth of the national economy averaging 3.7% annually, which should translate into higher tax revenue (personal income and property tax). Rybnik's interim results for 3Q17 are in line with our projections. The city reported an operating margin of 13.4% and an operating balance of PLN75 million or 4x its annual debt service in 2017. As operating expenditure usually accelerates during 4Q17, we expect that the city's operating balance will ease to PLN65 million at end-2017. In 2020, Rybnik's operating margin could fall to about 8%, due to a possible tax refund to a coal mine, pending a court verdict by 2019. The court ruling, the final amount and the possible repayment schedule are unknown at present, but we assume that the city's sound liquidity and strong operating performance would be able to absorb the refund, leaving the city's debt service capacity intact. MEDIUM Management and Administration - Strength: Rybnik's approach to budgeting is cautious, given inflexible current revenue and expenditure. Its operating margin is supported by our expectations of continued restraint on operating expenditure. The city's investment programme is considered and planned according to the city's self-finance capacity. Debt is incurred solely for financing investment and long-term loans with smooth amortisation are preferred, easing pressure on debt servicing. Institutional Framework - Neutral: Fitch assesses the regulatory regime for Polish local and regional governments (LRGs) as neutral. LRGs' activities and financial statements are closely monitored and reviewed by the central administration. LRGs' finances are public and LRGs are obliged to disclose their financial accounts on time and in detail. The main revenue sources such as income tax revenue, transfers and subsidies from the central government are centrally distributed according to a legally defined formula, which limits the central government's scope for discretion. Prudent individual borrowing limits are in place, which should help protect LRGs against taking on excessive debt. The city's ratings also reflect the following key rating drivers: Economy - Neutral: Rybnik is a medium-sized city with a population of about 140,000 located in the Slaskie Region and close to the Czech border. Its unemployment rate at end-October 2017 was 4.5% compared with 6.6% in Poland. Data for gross regional product for Rybnik is not available. Gross regional product per capita in 2015 (latest available data) in the Rybnicki sub-region was 87.7% of the national average; however, the ratio does not fully reflect the city's metrics as the sub-region includes also surrounding towns and villages that usually have weaker wealthy indicators. RATING SENSITIVITIES Rybnik's ratings could be upgraded if the city strengthens its operating performance, while maintaining sound debt metrics and a debt payback ratio at below five years on a sustained basis. A downgrade could result from a weakening of the city's operating performance accompanied by significant increase of debt, resulting in deterioration of the debt payback ratio towards 10 years on a sustained basis. Contact: Primary Analyst Dorota Dziedzic Director +48 22 338 62 96 Fitch Polska S.A. 16 Krolewska Street Warsaw 00-103 Secondary Analyst Magdalena Mikolajczak Analyst +48 22 338 62 85 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations: Malgorzata Socharska, Warsaw, Tel: +48 22 338 62 81, Email: Additional information is available on Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 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 EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001 Fitch Ratings, Inc. is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (the "NRSRO"). While certain of the NRSRO’s credit rating subsidiaries are listed on Item 3 of Form NRSRO and as such are authorized to issue credit ratings on behalf of the NRSRO (see here), other credit rating subsidiaries are not listed on Form NRSRO (the "non-NRSROs") and therefore credit ratings issued by those subsidiaries are not issued on behalf of the NRSRO. However, non-NRSRO personnel may participate in determining credit ratings issued by or on behalf of the NRSRO.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below