Fitch Affirms Johannesburg's Partial Guaranteed Bond at 'AA+(zaf)'
Fitch Ratings-London/Milan-10 September 2009: Fitch Ratings has today affirmed the City of Johannesburg Metropolitan Municipality's (CoJ) partial guaranteed structured 2016 ZAR1bn 11.9% bond's National rating of 'AA+(zaf)'. The Outlook is Stable.
The bond is rated two-notches above Johannesburg's senior unsecured rating of 'AA-'(zaf)', based on a 40% partial credit guaranteed provided on a several and not joint basis by the International Finance Corporation (IFC) and the Development Bank of Southern Africa (DBSA). The guaranteed amount, added to the standard unsecured recovery of 40% in South Africa, is consistent with the two-notch uplift based on Fitch's Criteria for Partial Credit Guarantees in Emerging Markets (please see www.fitchratings.com for further information).
Ultimately, the rating relies on the credit quality of CoJ, and on Fitch's expectations that the city will be able to absorb the spending pressures deriving from the upcoming World Cup football tournament in June 2010 and rising operating spending due to staff pay rises and more socially oriented policies. The ratings further reflect the expectation that COJ will be able to maintain its operating margin close to 10%, where it fell in fiscal years 2008 and 2009 due to slowing tax and fee proceeds amid the ongoing economic downturn.
Contacts: Jaime Sanz, London, Tel: +44 (0) 20 7682 7279; Raffaele Carnevale, Milan, Tel: +39 02 879087 203; Will Rossiter, +44 (0) 20 7417 6301.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com; Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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