Szczecin retained its rating
The Fitch Ratings Agency confirmed Szczecin’s long term international ratings for domestic and international debts at the “BBB+” level. The rating perspective is stable. Fitch also confirmed the short term rating in foreign currency at the “F2” level.
The Agency’s ratings reflect the city’s satisfactory operative results, moderate debt and the expected maintenance of a operative surplus at the level of 10% in medium time period. The ratings also consider the expected growth of domestic economy and considerable infrastructure investments planned in the years 2011-2013, which will increase the city’s debt. It is very important for the ratings maintenance that the city restricts its expenditure, so that operative results improve in a medium time period.
‘Szczecin once again maintained its rating at the same level. It is even more valuable, as the economic situation in Europe and around the world is still unstable. In the times of crisis Szczecin does very well and it best reflected by the condition of its finances’ – says Piotr Krzystek, the Mayor of Szczecin.
The agency noticed that Szczecin’s operative surplus dropped from 14% in 2009 to 9.1% of the operative income in 2010. It was caused by lower than expected PIT and CIT incomes (-6%) and an increase of operative expenses ( by 6.2%). Fitch expects that the city will improve its operative results in an extent which will ensure keeping the debt coverage index at a satisfactory level. The expected economic improvement should support this process.
According to Fitch, Szczecin’s debt is moderate. By the end of 2010 the debt was 480.000.000 PLN and it constituted 40% of current yield. Fitch expects that Szczecin’s debt will rise and it will be about 850.000.000 PLN in 2013 due to the realization of investment projects co-financed by the EU. About 86% of the debt are credits from the European Investment Bank and the Council of Europe Development Bank which enable the investments’ financing on favorable conditions. Szczecin can still spend 187.000.000 PLN from those credits. As a result of debt increase the debt repayment index can rise from about 5 years in 2010 to about 13 years in the years 2011-2013 and it will be close to an average debt maturity period.
Indirect risk can rise from 766 mil. in 2010 to 928 mil. in 2012. Fitch claims that the impact of indirect risk on the city’s budget is under control, as most of the investments are carried out by self-financed companies, therefore the city’s financial help will be limited to additional payments to the companies’ capitals.