July 6 (SeeNews) - Moody's Public Sector Europe (MPSE) said it has assigned a Ba2 long-term issuer rating to Zagrebacki Holding, a 100%-owned utility company of the City of Zagreb, while affirming its stable outlook.
The Holding's Ba2 rating on the senior unsecured bond maturing in July 2017 is unaffected by this rating action, the ratings agency said on Wednesday.
"The issuer rating of Zagrebacki Holding reflects Moody's opinion that its credit quality is closely linked to the credit quality of the City of Zagreb (Ba2, stable)", Moody's noted.
Moody's also said:
"The Holding benefits from its strong institutional and financial linkages with the City of Zagreb as its sole owner, either in the form of subsidies or regulated tariffs in most businesses. The rating also incorporates the strong oversight exercised by the City of Zagreb as well as the Holding's monopolistic status and strategic role for the city's utilities sector. As a result, Moody's believes that Zagrebacki Holding D.O.O.'s credit quality ultimately aligns with the City of Zagreb's credit rating.
The Holding's rating remains underpinned by the company's stabilized financial performance, improved debt maturity profile and boosted liquidity position. While the Holding's debt-to-operating revenue ratio remains high, it decreased to 109% in 2016 from 114% in 2013 and Moody's expects further debt reduction below 100% by 2019.
The stable outlook mirrors the stable outlook of the City of Zagreb. Moody's expects that the institutional and financial framework under which the Holding operates will not change in the medium-term.
WHAT COULD CHANGE THE RATINGS UP/DOWN
An upgrade of Zagrebacki Holding D.O.O.'s rating would result from a similar action on the City of Zagreb's rating, given their close financial and operational linkages.
A downgrade of the Holding's rating would result from a downgrade of the City of Zagreb's rating. In addition, negative changes in the institutional and financial framework under which the Holding operates could also exert downward pressure on the company's rating."