Reuters logo
Fitch Revises Polish City of Plock's Outlook to Positive; Affirms at 'BBB'
June 9, 2017 / 8:14 PM / 3 months ago

Fitch Revises Polish City of Plock's Outlook to Positive; Affirms at 'BBB'

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: City of Plock - Rating Action Report here WARSAW/LONDON, June 09 (Fitch) Fitch Ratings has revised the Polish City of Plock's Outlook to Positive from Stable and affirmed Plock's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BBB'. Fitch has also upgraded the city's National Long-Term Rating to 'AA-(pol)' from 'A+(pol)'. The Outlook on the National Rating is Positive. Fitch has also affirmed Plock's PLN48 million and PLN86.9 million outstanding senior unsecured bonds at 'BBB', while upgrading the bonds' National long-term rating to 'AA-(pol)' from 'A+(pol)'. Today's rating action reflects Fitch's base case scenario that Plock will continue to improve its operating performance over the medium term, with the operating margin growing to around 11% and the debt-to-current balance ratio (debt payback ratio) strengthening to about six years. KEY RATING DRIVERS The key rating drivers and their relative weights on Fitch's decision are presented below: HIGH Fitch expects that over the medium term Plock will report an operating balance of about PLN90 million-PLN95 million which translates into an operating margin of around 11%. The projected operating balance will be 1.6x higher than annual debt service (instalments and interests). For 2017 Plock's operating results are estimated to be exceptionally high with an operating balance of above PLN100 million and operating margin of over 13%, supported by an already received additional CIT revenue of PLN30 million. In 2016 the city's operating results improved for the second year in a row and exceeded Fitch projections. Its operating balance rose to PLN97 million (2015: PLN68 million) and accounted for 11.9% (2015: 9.4%) of operating revenue. The 2016 results, however, were additionally supported by a PLN10m one-off revenue from VAT returned to the city. Adjusting for this item and also the inflating effects of the Family 500+ transfers going through city's budget in 2016, the operating margin would have been 11.4%, still well above the 2015 results. MEDIUM The improved operating performance was mainly due to the city's more cost-oriented approach and operating expenditure growth being maintained below operating revenue growth. In 2016 operating expenditure grew 3.3%, slower than operating revenue growth of 5.7% (after excluding Family 500+ transfers and one-offs for comparison). Fitch views the revised approach to financial management as a supportive rating factor. Fitch takes a positive view of the city's revised debt policy of attracting long-term loans on favourable terms from the European Investment Bank (EIB). In 2017-2019 Plock plans to take up a PLN150 million EIB loan with a five-year grace period and a 15-year repayment. The city's liquidity has also improved with cash of PLN28 million between January and April 2017, compared with PLN10 million in 2016. In the medium term Fitch expects the city's debt to remain moderate and stable at below 60% of current revenue. In nominal terms it may reach around PLN500 million in 2019 (2016: PLN479 million) when the city will take up the EIB loan to co-finance its investment programme. We expect the city's capital expenditure to rise to above PLN200m annually in 2017-2018 from about PLN90 million in 2016. However, the investments are likely to be financed by capital revenue (more than 50%), mainly EU grants, and from the current balance (40%), thus limiting the city's debt needs. Fitch also projects that over the medium term the city's debt payback ratio will improve to about six years, which is below the city's final debt maturity of 13 years. The city's ratings also reflect the following key rating drivers: Plock enjoys much greater financial flexibility than cities of similar size, due to its wealthy tax base. Petrochemical companies' large property estates result in high property tax revenue, which represented 52% (PLN215 million) of the city's tax revenue in 2016, followed by personal income tax (PLN166 million or 40%). With a population of 122.000 in 2016, Plock is a medium-sized city by Polish standards, and located in the Mazowieckie Region (BBB+/Stable). In 2014 the Plocki sub-region's gross regional product per capita was 148% of the national average, by far exceeding the average for much larger Polish cities. RATING SENSITIVITIES The ratings could be upgraded if Plock's strong operating performance is sustained, and if continued debt recourse reduction results in a further improvement of the debt-to-current balance ratio to below 10 years. Contact: Primary Analyst Magdalena Mikolajczak Analyst +48 22 338 62 85 Fitch Polska S.A. 16 Krolewska Street Warsaw 00-103 Secondary Analyst Renata Dobrzynska Director +48 22 338 62 82 Committee Chairperson Christophe Parisot Managing Director +33 1 44 29 91 34 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Malgorzata Socharska, Warsaw, Tel: +48 22 338 62 81, Email: malgorzata.socharska@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 National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation 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

Our Standards:The Thomson Reuters Trust Principles.
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