March 31, 2017 / 7:17 AM / 5 months ago

Fitch Affirms Rotorua Lakes Council at 'AA-'; Outlook Stable

(The following statement was released by the rating agency) SYDNEY/HONG KONG, March 31 (Fitch) Fitch Ratings has affirmed Rotorua District Council's (which operates as Rotorua Lakes Council) Long-Term Local-Currency Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook and its Short-Term Local-Currency IDR at 'F1+'. The ratings reflect support from New Zealand's robust institutional framework for local and regional councils and the council's improving fiscal performance, strong management and sound socio-economic profile amid debt metrics that remain weaker than the average for 'AA' rated peers. However, Fitch expects the debt metrics to improve over the long term. KEY RATING DRIVERS New Zealand's institutional framework for local authorities is an important positive rating factor for Rotorua Lakes Council. This is demonstrated by transparent reporting and financial disclosure; strong controls and supervision; a high level of predictable own-source revenues (rates) with wide rate-setting powers; strong creditor protection, with borrowings generally secured over the council's rating base; and limited labour intensive responsibilities, as health and education are provided by the central government. Fitch calculated an operating margin of 26.2% in the financial year ending June 2016 (FY16), up from 24.3% in FY15. Fitch sees the council's financial management as a strength, with long-term projections consistent with local peers and well above similarly rated international peers. Rotorua Lakes Council has addressed previously weak performance through a mix of restructuring, expense cuts and revenue increases. Fitch believes financial forecasts, as outlined in council's annual and long-term plans, are achievable, with operating margins forecast to average 28.0% over the four years to FY20. Tourism is the largest industry in the small but economically diverse region and remains a key component in Rotorua Lakes Council's long-term strategic vision. Tourism supported strong GDP growth of 3.9% to NZD2.7 billion in the year to end-2016. Tourist expenditure in the district rose 4% to NZD773 million in the year to end-January 2016, against a national growth rate of 7%. The unemployment rate was 5.8% at end-2016, and has historically been above the national rate, although improved by 1.7pp over the year. The region does not have any significant concentration in any one employer due to the large tourism sector, which mitigates idiosyncratic risk. Rotorua Lakes Council's debt/current revenue ratio is high relative to that of its international 'AA' peers, but is supported by the council's adequate financial flexibility, including predictable revenue and access to funding from the New Zealand Local Government Funding Authority (LGFA). The council is committed to lowering debt levels and its forecast peak levels have declined between long-term plans. Fitch calculates a debt/current revenue ratio of 172% peaking at FYE20 then declining through to FYE25. Net overall risk ratios are in line with highly rated international peers, as the council has minimal contingent liabilities or guarantees, which Fitch includes in these ratios. Strong capex management is important to achieve the council's financial projections. The council forecasts capex of NZD320 million over 10 years to FY25; this is 85% of projected capex contained in RLC's long-term service plans for its infrastructure assets. Rotorua Lakes Council's historic performance mitigates the risk of higher-than-expected capex. The council has been operating below its capex budget as it has completed projects below budget, its assets last longer than scheduled and some projects have not proceeded. RATING SENSITIVITIES Rotorua Lakes Council's ratings could come under pressure if its budgetary performance deteriorates unexpectedly and the debt/current balance is above 10 years for a prolonged period. Weakening fiscal discipline and a failure to control capex, resulting in debt/current revenue ratios approaching 200%, would lead to negative rating action. Positive rating action would require the council to sustain high current margins in excess of 20% and its debt/current revenue ratio moving towards 125%. The council would need to demonstrate a sustained outperformance in its margins relative to less leveraged peers, given its high relative debt level. Contact: Primary Analyst John Birch Director +62 2 8256 0345 Fitch Australia Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 Secondary Analyst Samuel Kwok Associate Director +852 2263 9961 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Summary of Data Adjustments - The financial data used in Fitch's calculations are taken from Rotorua Lakes Council's annual reports. We have made the following adjustments to the reported numbers: - Depreciation and impairment of property, plant and equipment are excluded from capital expenses. - Cash flow for the purchase of property, plant and equipment and intangible assets is included in capital expenses. - Cash flow from the sale of property, plant and equipment is included in capital revenue. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1021428 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 <a href="https://www.fitchratings.com">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 AT <a href="https://www.fitchratings.com/site/regulatory">HTTPS://WWW. FITCHRATINGS.COM /SITE/REGULATORY. 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

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