March 3, 2017 / 7:03 PM / 5 months ago

Fitch Affirms Historical Territory of Alava at 'A'; Outlook Stable

13 Min Read

(The following statement was released by the rating agency) BARCELONA, March 03 (Fitch) Fitch Ratings has affirmed the Historical Territory of Alava's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'A' with Stable Outlook. Fitch has also affirmed the province's Short-Term Foreign Currency IDR at 'F1'. The ratings on the senior unsecured outstanding bonds have been affirmed at 'A'. The affirmation reflects Alava's strong socio-economic profile, sound fiscal performance, and solid debt coverage. The Stable Outlook reflects that on Spain (BBB+/F2/Stable), as the province is presently rated at two notches above the sovereign. KEY RATING DRIVERS Fiscal Autonomy Supports Rating Uplift Alava is rated higher than the Spanish sovereign because of its financial and fiscal autonomy as recognised by the Spanish constitution, which mitigates sovereign unilateral interferences with the province's revenue. The ratings reflect Alava's special status, solid socio-economic profile, proven ability to maintain stable and sound operating performance, and a solid debt coverage ratio. The ratings also take into account the province's prudent management and high levels of financial transparency. In common with the other two Basque provinces, Alava has a special legal and fiscal status, which is explicitly recognised by the Spanish Constitution. Under this regime, the provinces benefit from a special tax arrangement, whereby they have wide fiscal powers, are entitled to levy and collect taxes in the province and have the authority to set rates on a number of taxes, primarily personal income tax. This gives the provinces strong fiscal flexibility and is a positive rating factor. Some of the fiscal receipts have to be transferred to other tiers of government as per an established agreement. Strong Economy Economic growth drives Alava's tax revenues, which increased on average 4% yoy between 2014 and 2015. Alava is a wealthy province by national and international standards, with a GDP per capita in 2014 estimated at 52.6% above the Spanish average. Its economy is strong and diversified, with a solid and significant manufacturing sector (31% of GDP in 2014 for Alava versus 13% for Spain) and a smaller contribution from the construction sector than at the national level. Alava's solid fundamentals are also demonstrated by a high employment rate, at 51.8% in 4Q16 versus 47.9% for Spain. Jobs creations increased 6.3% between 4Q13 and 4Q16, after significant job losses of 9% over the past six years. However, the province has a higher share of elderly population than Spain, which translates into higher pressure on social public services. Resilient Fiscal Performance The province has reported strong fiscal performance, posting a positive current balance over the last five years and an operating margin averaging 7% in 2011-2015. Alava has approved its budget for 2017 and Fitch's base case scenario projects that the operating margin will remain solid for 2016-2017 at 6%-7%, based on tax revenue growth as the provincial economy continues to improve. Operating spending is likely to grow 3%-4% over 2016-2017, largely on social programmes, following spending cuts of 11% over 2008-2014. Alava's ability to control expenditure, raise revenue, and to avoid operating and overall deficits, is a credit-strength. The May 2015 elections saw a coalition being formed between the regional right wing party Partido Nacionalista Vasco (PNV), with the support of the socialist wing party PSE-EE. The Deputy is Ramiro Gonzalez Vicente, and we expect a strong intention to comply with fiscal targets and an intensification of fight against fraud. Solid Debt Coverage Alava's direct debt was stable in 2015 at EUR515.6 million or four years of current balance, and Fitch expects this to stabilise in 2016-2017. At end-2016 debt repayment for the next three years totalled EUR180.5 million, representing about 35% of outstanding estimated direct debt. RATING SENSITIVITIES A minimum condition for Alava's IDRs to be upgraded is an upgrade of the sovereign, as the province is presently at two notches above the sovereign rating, together with an improvement of the operating margin to 10%. A downgrade may result from a substantial increase in direct debt to substantial deterioration in the direct debt servicing -to-current revenue ratio (2015: 2.2%), or from a downgrade of the sovereign. Contact: Primary Analyst Julia Carner Analyst +34 93 323 8401 Fitch Ratings Espana, S.A.U. Av. Diagonal, 601, Barcelona 08028 Secondary Analyst Guilhem Costes Senior Director +34 93 323 8410 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Pilar Perez, Barcelona, Tel: +34 93 323 8414, Email: pilar.perez@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 Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020039 Solicitation Status here 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. 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 © 2016 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

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