S&P lowers Bulgaria's Plovdiv city to BB+, outlook stable

The city’s outlook is stable, the agency said in a statement on Tuesday.

S&P also said in the statement:

"RATIONALE

The downgrade reflects our similar action on Bulgaria (see "Bulgaria Ratings Lowered To 'BB+/B' On Fiscal Risks From State Support Of Banks; Outlook Stable, " published Dec. 12, 2014, on RatingsDirect).

Under our methodology, a local or regional government (LRG) can be rated higher than its sovereign if we believe that it exhibits certain characteristics, as described in "Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions," published Nov. 19, 2013.

We do not currently believe that Bulgarian LRGs, including Plovdiv, meet these conditions. Consequently, we do not rate Plovdiv higher than Bulgaria.

We assess Plovdiv's stand-alone credit profile (SACP) at 'bbb-'. The SACP benefits from Plovdiv's low but increasing tax-supported debt burden with low contingent liabilities. We also take into account the city's average budgetary performance and its adequate liquidity, thanks to large accumulated cash reserves. We regard Plovdiv's budgetary flexibility as average in an international comparison. Our assessment of the SACP is constrained by our view of the evolving but unbalanced institutional framework for municipalities in Bulgaria, as well as our assessment of Plovdiv's financial management as weak, and the weak status of Plovdiv's economy in an international comparison.

We might revise downward Plovdiv's SACP if we notice a weakening of the institutional framework under which Bulgarian local governments operate.

OUTLOOK

The stable outlook reflects that on Bulgaria. Any rating action we take on the sovereign would likely be followed by a similar action on Plovdiv, as long as the city's financial and economic developments remain aligned with our base-case scenario.

A rating upgrade for the city of Plovdiv is contingent on a positive rating action on Bulgaria, as we do not rate Bulgarian municipalities above the sovereign.

A downgrade stemming from a deterioration of Plovdiv's SACP is unlikely, since the SACP on the city is higher than its issuer credit rating."