S&P raises Zagrebacki Holding to 'B' on upgrade of Zagreb, outlook stable

“We believe Zagreb's strong economic growth will be resilient to higher energy costs, and that the city can keep operating expenditure under control and spending growth below inflation rates,” the ratings agency said in a press release on Wednesday.

On September 23, S&P upgraded Zagreb's ratings to 'BB' from 'BB-' following an upgrade of the sovereign.

The stable outlook of the holding reflects that on the city.

S&P expects that Zagreb's willingness to provide extraordinary support to Zagrebacki Holding will remain very high, and that Zagrebacki Holding will refinance its 2.3 billion kuna ($302 million/306 million euro) bond before it matures in July 2023.

Zagrebacki Holding acts as a vehicle to implement the city's policies. Its operations include gas distribution and supply, water treatment and supply, waste collection and treatment, as well as management of city cemeteries, pharmacies, markets, outdoor advertisement, and municipal housing. The city's administration is heavily involved in defining and establishing the company's strategy, investment plan, and budget for the current year, as well as tariff increases and recent social plans, S&P noted.

Croatia's entry into the eurozone from January 2023 is also expected to improve Zagreb's access to funding and liquidity and in turn that of Zagrebacki Holding, S&P said.

( 1 euro = 7.527 Croatian kuna)