London, 26 June 2012 -- Moody's Investors Service has today assigned a global-scale
foreign and local-currency issuer rating of Baa2 to the county
(powiat) of Zywiec (Starostwo Powiatowe w Zywcu) in Poland. The
outlook on the rating is stable.
RATINGS RATIONALE
"The County of Zywiec's Baa2 issuer rating is underpinned
by its adequate operating performance, as reflected in a gross operating
balance (GOB) of approximately 10% of operating revenue in 2011,
and its manageable debt burden, which remains well within the national
borrowing limits," says Gjorgji Josifov, a Moody's
Assistant Vice President and lead analyst for Zywiec.
An improvement in Zywiec's operating performance over the last two
years was attributable to increasing levels of own-source revenue
and inter-governmental transfers, coupled with slower growth
in operating expenditure. Moody's expects further improvements
in Zywiec's GOB to 12% of operating revenue in the next two
years based on favourable revenue growth and a track record of controlling
expenditure growth.
Moody's notes that Zywiec's presently moderate debt has been
stable at around 49% of operating revenue over the last three years
and is expected to fall to levels of approximately 40% in the next
few years. Debt service, at 7.5% of total revenue
in 2011, should decrease to a manageable 5%-6%
of total revenue as a result.
The rating is constrained by Zywiec's modest financing deficits
recorded over the last four years, low liquidity levels and its
significant infrastructure requirements. However, Moody's
believes that Zywiec's administration will be able to match funding
available from both the national government and the EU with its own capital
expenditure in order to strictly limit further deficits going forward.
Zywiec has historically displayed very low liquidity levels that are dependent
on state transfers. A prudent budgetary approach should help the
county to preserve its current liquidity levels at a low 4.3%
of operating revenues in 2011.
WHAT COULD MOVE THE RATINGS UP/DOWN
Any significant improvement in Zywiec's operating and budgetary performance,
an enhancement in the county's liquidity position and a sustained
decrease in direct debt could exert upward pressure on the rating.
A positive rating action would also require fundamental changes in the
current financial framework, granting counties substantial revenue-raising
capacity along with more flexible operating expenditure.
Any downward movement in the sovereign rating could exert downwards pressure
on Zywiec's rating due to its close linkages with the central government.
Sustained deterioration in the county's operating and financial
performance and an increase in debt levels could also adversely influence
the rating.
PRINCIPAL METHODOLOGY
The methodologies used in this rating were The Application of Joint-Default
Analysis to Regional and Local Governments published in December 2008,
and Regional and Local Governments Outside the US published in May 2008.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
With 150,000 inhabitants, situated in south-western
Poland, in the Silesian region, Zywiec is medium-sized
among Poland's 373 counties. As one of the region's economic
hubs, Zywiec benefits from a diversified economy, a skilled
workforce and good location in an economically thriving region in the
vicinity of the Czech and Slovak borders. Zywiec is headquarters
for a number of important enterprises in the region. Because of
its location, climate and natural conditions, the county is
also a very attractive tourist destination, helping to attract a
high proportion of foreign direct investment.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Gjorgji Josifov
Asst Vice President - Analyst
Sub-Sovereign Group
Moody's Investors Service Limited Czech Branch
Washingtonova 17
110 00 Praha 1 (Prague 1)
Prague,
Czech Republic
Telephone: +420-22-422-2929
David Rubinoff
MD - Sub-Sovereigns
Sub-Sovereign Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns Baa2 issuer rating to Zywiec County; outlook stable
