Fitch Affirms City of Buenos Aires at 'CCC'

MONTERREY, Mexico--(BUSINESS WIRE)-- Fitch Ratings has affirmed the City of Buenos Aires's (CBA) ratings as follows:

--Long-term and local currency Issuer Default Rating (IDR) at 'CCC';

--Short-term and local currency IDR at 'C';

--Euro medium-term note programme (EMTN) up to USD2.29 billion long-term rating at 'CCC';

--Series 10 for USD415 million long-term rating at 'CCC';

--Series 11 for USD500 million long-term rating at 'CCC';

--Programme of short-term treasury bills up to ARP950 million short-term rating at 'C'.

KEY RATING DRIVERS

CBA's ratings considers its adequate fiscal and budgetary performance, generating sound operating margins over the last years despite the pressures on operating expenditures; it maintains high financial flexibility, adequate leverage and sustainability ratios; and it is Argentina's primary economic and financial center. The CBA's unfavorable debt structure (88.8% in foreign currency) and its country ceiling constrain the rating.

In 2014, the operating margin remained at a very similar level than 2013 (15% versus 14.9%), based on a very good income dynamics that surpassed the evolution of operational expenditure.

Fitch estimates that by 2015 the operating margin will maintain its good performance and be around the average of the last three years, slightly below the CBA's 2015 budget of 15.8%, however in adequate levels.

The city has a high financial flexibility. About 89.1% of total revenues are collected and administered locally. This shows a low reliance on federal transfers for the city's revenues and compares very favorably with the provincial average of 43.8%. However, the revenue structure is exposed to economic fluctuations.

Regarding debt, despite the considerable nominal debt increase in recent years due to the argentine peso's depreciation and important investment projects, leverage and sustainability ratios are still very adequate, compared with peers. In 2014, the consolidated debt accounted for 28.7% of current revenues and 2.14x the current balance. Fitch expects the city's debt indicators will be adequate, even considering the authorized new debt budgeted for 2015. Fitch estimates debt will represent about 25.4% of the current revenues and 1.9x the current balance.

The main risk or limitations for CBA is the structure of debt. Despite CBA's low level of indebtedness, its debt structure is largely composed of debt in foreign currency (mainly U.S. dollars). This constitutes one of the major rating weaknesses due to the high exposure to the foreign exchange rate risk. In March 2015, foreign currency debt accounted for 88.8%.

The CBA is the country's major economic and financial center. According to preliminary information, in 2013, the city's contribution to Argentina's GDP reached about 23.3% and was mainly driven by the real estate and commerce sectors. CBA's GDP per capita is three times the national average. Fitch does not expect significant changes in the city's production structure and its social and economic indicators.

RATING SENSITIVITIES

Fitch's sensitivity analysis does not foresee any developments that would lead to a rating downgrade.

An upgrade of the sovereign rating, accompanied by CBA's solid operating performance, would trigger a positive rating action.

Additional information is available on www.fitchratings.com

Applicable Criteria

International Local and Regional Governments Rating Criteria (pub. 18 May 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865254

Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988874

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988874

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150731005754/en/

Fitch Ratings
Primary Analyst
Humberto Panti
Senior Director
+52 81 83999152
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L.
or
Secondary Analyst
Martha Gonzalez
Associate Director
+52 81 83999132
or
Committee Chairperson
Gerardo Carrillo
Senior Director
+52 55 5955 1600
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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