The US credit ratings agency Fitch Ratings has raised the City of Gdansk’s long-term ratings to A- from BBB+ for foreign and local currency debt while at the same time raising its national long-term rating to AA (pol) from AA- (pol). The agency wrote in an accompanying report that the rating outlook is stable and that the upgrade had come about as a result of the city’s ‘continued sound operating performance’.
“The upgrade reflects Gdansk's continued sound operating performance and prudent financial management, which together with high capital revenue, supports a strong self-financing capacity for its investment plans. The upgrade factors in also the stabilisation of direct risk below 50% of current revenue, despite projected high capital spending. The Stable Outlook reflects Fitch's expectations that the strong operating performance will be maintained in the medium term, despite pressure on operating spending.”
Fitch expects the city to maintain its financial flexibility; control growth in operating expenses and see tax revenues increase due to forecasted economic growth in the medium term. Fitch expects Gdansk‘s operating surplus in the medium term will be around 13% -14% of operating revenue, a figure which is higher than the average during the period 2011-2013.
Fitch also expects Gdansk’s total debt to fall from 1.4 billion PLN at the end of 2012 to stabilize at around 1.1 billion PLN in the period 2015-2017. With increased revenues this is likely to see debt fall to below 50% of revenues which is a marked improvement on the 73% mark it registered at the end of 2012.
Most of the city’s debt is relatively low-cost financing with international financial institutions and the city took the opportunity to repay 50 million PLN of more costly debt from its cash reserves in 2014. The city also has plans to repay a further 83 million PLN of higher yield debt in 2015 and Fitch expect the city’s debt servicing and debt payback ratios to remain healthy in the period 2015-2017.