(The following statement was released by the rating agency)
Apr 05 - Fitch Ratings has affirmed the Region of Mazowieckie’s Long-term foreign currency rating at ‘BBB+', Long-term local currency rating at ‘A-’ and Long-term National rating at ‘AA(pol)'. The Outlook on all ratings is Stable. Fitch has also affirmed Mazowieckie’s EUR50m and EUR32m bonds’ Long-term foreign currency rating at ‘BBB+'.
Mazowieckie’s ratings reflect its satisfactory 2011 operating results and debt coverage and expected further financial improvement. The ratings factor in Fitch’s expectation that the region will continue implementing deep cost cutting measures and demonstrate sustainable budgetary discipline. The ratings also reflect Fitch’s expectations that the region’s direct debt will stabilize at about PLN1.6bn and indirect risk will not grow above PLN1.0bn by 2015. The Stable Outlook reflects Fitch’s belief that Mazowieckie will be able to curb its opex and maintain an operating balance comfortably covering its growing debt service.
Operating balance lower than annual debt service and overall risk (including the risk of the health care sector) increasing above the 2011 level could lead to a negative rating action. Conversely sound operating performance with the operating margin maintained above Fitch’s projections with the direct debt to current balance below seven years as well as indirect debt decreasing below the current level could lead to an upgrade.
Fitch expects that the cost rationalisation measures implemented by the region in 2011 may lead to a satisfactory operating balance of an average of PLN292m per year in 2012-2015 (up from PLN201m in 2011) representing about 13% of operating revenue by average. Debt service will grow steadily to about PLN200m in 2015.