London, 30 April 2015 -- Moody's Investors Service EMEA Limited (Moody's) has today downgraded
the issuer rating of the City of Athens to Caa2 from Caa1. Today's
rating action concludes the review for downgrade initiated on 9 February
2015. The rating outlook is negative.
The rating action follows Moody's downgrade of Greece's government
bond rating to Caa2 (negative outlook) from Caa1 (review for downgrade)
on 29 April 2015. For additional information, please refer
to the sovereign press release:
https://www.moodys.com/research/--PR_323922
RATINGS RATIONALE
Moody's rating action on the City of Athens reflects the rating
agency's assessment of the increase in systemic risk driven by (1)
the high and rising uncertainty over whether Greece's government
will reach agreement with official creditors in time to meet upcoming
repayments on marketable debt, and (2) the significant implementation
risks of a medium-term financing programme.
The downgrade of the rating on the City of Athens reflects its close operational
and financial linkages with the Greek government and the lack of special
status, which prevents the city from being rated above the sovereign.
Municipalities in Greece, including the City of Athens, cannot
act independently from the sovereign and do not have enough financial
flexibility to permit their credit quality to be stronger than that of
the sovereign.
In addition, institutional linkages intensify the close ties between
the two levels of government through the sovereign's ability to
change the institutional framework under which Greek municipalities operate.
Although Athens has good autonomy in management, Moody's notes
that the city is highly reliant on central government transfers for operations
and capital investments, and has a high level of integration of
its local economic base with that of the national economy. City
of Athens derives around 40% of its operating revenues from central
government transfers (second largest source of income) and capital investments
are almost entirely funded by government grants and EU funds.
RATIONALE FOR ASSIGNING NEGATIVE OUTLOOK
The negative outlook on the rating of the City of Athens mirrors the negative
outlook on the sovereign government bond rating.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Given the negative outlook assigned to the sovereign bond rating,
an upgrade of the rating is unlikely.
Further deterioration in the sovereign's credit quality accompanied by
the deterioration in its credit profile will exert downward pressure on
the City of Athens' rating. In addition, the Greek
government recently issued an emergency decree requiring public sector
bodies to transfer their cash reserves to the central bank. Moody's
will monitor the impact of this measure on Athens' liquidity position.
The sovereign action required the publication of this credit rating action
on a date that deviates from the previously scheduled release date in
the sovereign release calendar, published on www.moodys.com.
The specific economic indicators, as required by EU regulation,
are not available for Athens, City of. The following national
economic indicators are relevant to the sovereign rating, which
was used as an input to this credit rating action.
Sovereign Issuer: Greece, Government of
GDP per capita (PPP basis, US$): 25,859 (2014
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 0.8% (2014 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): -2.6%
(2014 Actual)
Gen. Gov. Financial Balance/GDP: -3.5%
(2014 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 0.9% (2014 Actual) (also
known as External Balance)
External debt/GDP: [not available]
Level of economic development: Low level of economic resilience
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On 29 April 2015, a rating committee was called to discuss the rating
of the Athens, City of. The main points raised during the
discussion were: The systemic risk in which the issuer operates
has materially increased.
The principal methodology used in these ratings was Regional and Local
Governments published in January 2013. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this rating action, if applicable.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Gjorgji Josifov
Asst Vice President - Analyst
Sub-Sovereign Group
MIS EMEA Limited Czech Branch
Washingtonova 17
110 00 Praha 1 (Prague 1)
Prague
Czech Republic
Telephone: +420-22-422-2929
David M Rubinoff
MD - Sub-Sovereigns
Sub-Sovereign Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service EMEA Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades City of Athens to Caa2 from Caa1; outlook negative