November 3 (SeeNews) - Moody's Investors Service said that it completed a periodic review of the ratings of Serbia's cities of Belgrade, Novi Sad and Valjevo, which did not involve a rating committee.
The review was conducted through a portfolio review in which the agency reassessed the appropriateness of the ratings in the context of the relevant principal methodologies, recent developments, and a comparison of the financial and operating profile to similarly rated peers, Moody'ssaid in a statement on Tuesday.
The Ba2 credit profile of Belgrade reflects its strong fiscal management, which results in solid financial performance and a track record of declining debt burden with limited borrowing requirements. It is also underpinned by Belgrade's role as the capital city and the country's largest economic hub, accounting for almost 40% of Serbian gross domestic product (GDP), Moody's said.
"At the same time, the rating takes into account the city's high investment requirements, associated with pressure stemming from its public transport company. Besides the fundamental factors reflected in the city's baseline credit assessment of ba2, its credit profile also benefits from Moody's assessment of a strong likelihood of extraordinary support from the Government of Serbia (Ba2) in the event that the issuer were to face acute liquidity stress," Moody's noted.
Novi Sad's Ba2 reflects its strong operating performance with gross operating balance (GOB) averaging 19% of operating revenue over the last five years. The credit profile of Novi Sad is also supported by declining and low debt levels and ample liquidity, which covers almost 2x of the city's outstanding debt and mitigates its foreign-currency exposure.
"Novi Sad's credit profile also takes into account the city's important role in the national economy as the second largest city in the country. At the same time, the credit profile remains constrained by the city's high investment requirements and limited expenditure control under the current evolving framework," Moody's said.
The Ba3 credit profile of Valjevo reflects its consistently prudent budgetary management as evidenced by the city's sound operating margins. Valjevo's credit profile remains constrained by high infrastructure needs, which could put a moderate pressure on the city's finances and limited expenditure control under the current evolving framework.