Auckland Council Ratings Affirmed At #AA/A-1+#; Outlook Remains Stable

Stocks and Financial Services Press Releases Thursday October 5, 2017 12:48
S&P Global Ratings--5 Oct--S&P Global Ratings
RATING ACTION
On Oct. 5, 2017, S&P Global Ratings affirmed its 'AA' long-term and 'A-1+' short-term credit ratings on New Zealand (the Crown) local government Auckland Council. The outlook on the ratings remains stable.
OUTLOOK
The stable outlook reflects our expectation that the council will continue to manage the city's growth pressures and large capital expenditure requirements while containing its debt levels.
Downside Scenario

Downward rating pressure might arise if we consider its financial management is weakening, resulting in higher deficits and debt levels. This could occur if infrastructure spending substantially increases without offsetting revenues, leading to after-capital account deficits underperforming our forecasts. This would result in debt rising to more than 270% of operating revenues.

Upside Scenario

Upward pressure on the ratings is unlikely, given the city's growth pace, size of its capital-expenditure requirement, and the rating on New Zealand. An upgrade could occur if we raised the rating on the New Zealand sovereign and Auckland's financial position also substantially improved through higher revenues to fund its capital expenditure, and reduced borrowings.


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