MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed Bogota, Capital District of Colombia's (the District) ratings as follows:
--Long-term foreign Issuer Default Rating (IDR) at 'BBB';
--Long-term local currency IDR at 'BBB+';
--National rating at 'AAA (col)';
--Short-term national rating at 'F1+ (col)'.
Additionally, Fitch affirms for the following ratings:
--USD300 million equivalent, 9.75% Colombian Peso-denominated notes due 2028, at 'BBB';
--COP2,000,000 million notes at 'AAA (col)'.
The Rating Outlook is Stable.
KEY RATING DRIVERS
Such rating actions are the result of the financial strength that Bogota has shown over the past years, as well as its manageable debt metrics, including debt projections in line with the debt ceiling approved. Moreover, the strong socio-economic profile of the District and weight in the national economy in terms of GDP contribution are factors considered in the rating action. Political risk associated with the public sector and the quality of the administration in turn has been incorporated as well.
The main risk or limitations for Bogota are the increasing social and infrastructure needs of a growing population, particularly those related to transportation; and high contingent liabilities regarding pension and retirement payments of employees that have been funded partially according to law.
According to Fitch's methodologies and criteria the international ratings of the District are capped by Colombia's sovereign risk (IDR foreign currency 'BBB', local currency 'BBB+').
The District of Bogota maintains a strong financial position through a solid base of tax revenues, current expenditures restraints, high liquidity levels and a discreet debt policy. In 2013, tax revenues represented approximately 65% of its total revenues, climbing to COP5.82 billion (USD3,095 million) keeping annual growth rates supported by their tax management model; the payment culture of its tax payers and the sound economy of the region. The positive dynamic of revenues in the last three years have registered nominal growth rates superior to 8% during the mentioned period.
The control over operating expenditures -with a real growth of 4.7% in 2013- and the positive dynamism in its tax revenues, explain the robust generation of operating margins of the District, giving more financial flexibility to pay financial obligations and fund investment projects. Fitch estimates that the financial position of Bogota will keep stable, situation that will allow the entity to maintain its financial strength, even though leverage is expected to increase.
Bogota maintains a discreet debt policy, focused on long run external debt. By April, the debt level rose to COP1.47 billion (USD782 million), representing 80% of its external debt. The leading risks linked to its debt portfolio such as exchange rate risk, interest rate fluctuations and concentration of capital amortization; as well as liquidity levels, are factors watched closely by the District and are according to the guidelines.
By 2013 and according the District's estimations, the interest to operational savings ratio ascended to 1.7%, level significantly low relative to the maximum 40% established by the Ley 358 (Law 358 of 1997). On the other hand, debt represented 17.26% of current revenues at the end of the year, level below the 80% maximum established as a limit in the mentioned law.
The actual administration, through its Plan de Desarrollo Bogota Humana, intends the realization of important infrastructure and mobility projects based on their financing strategy of greater tax revenues and transfers. Similarly, they expect additional resources through a financial credit of COP3.837 billion (USD2,040 million) approved by the Concejo Distrital. Fitch will heed the debt incurred, forecasting an increase in its indicators over the next years but in line with the grade of the District given its financial strength.
RATING SENSITIVITIES
The Stable Outlook reflects that Fitch's sensitivity analysis does not foresee any developments that would lead to a rating action.
An upgrade of the sovereign rating, accompanied by Bogota's solid operating performance, could trigger a positive rating action. The main factors that individually or collectively, lead to a negative rating action include: a significant debt increase (short-term and/or long-term), a substantial deterioration in its operating margins and cash levels, and persistent budget deficits.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' dated Aug. 14, 2013;
--'International Local and Regional Governments Rating Criteria, Outside the United States', dated April 23, 2014.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
International Local and Regional Governments Rating Criteria - Outside the United States
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=719656
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837538
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