Ratings On Queensland Treasury Corp. Affirmed At #AA+/A-1+#; Outlook Remains Stable

Stocks and Financial Services Press Releases Thursday October 19, 2017 16:56
MELBOURNE--19 Oct--S&P Global Ratings
MELBOURNE (S&P Global Ratings) Oct. 19, 2017--S&P Global Ratings today said it has affirmed its 'AA+/A-1+' ratings on Queensland Treasury Corp. (QTC). The outlook remains stable.
The ratings on QTC reflect our assessment of an almost certain likelihood that extraordinary support would be forthcoming from QTC's owner and guarantor, the state of Queensland, in a distress scenario.
In accordance with our criteria for government-related entities (GREs), our view of an almost certain likelihood of extraordinary support is based on our assessment of QTC's:
  • Critical operational role in managing the state's and its authorities' debt, a significant proportion of the state's financial assets, and in providing corporate finance advice. In our view, a default by QTC would have a critical impact for the Queensland government because QTC's debt is guaranteed by the government, is the sole provider of debt financing to the state and its authorities, and it holds the state's multibillion defined benefit superannuation assets that can be used for liquidity.
  • Integral link with the Queensland government, which owns QTC and provides guarantees to it. QTC and its owner are so intrinsically linked that we assess the operations of QTC and its management of borrowings, liquidity, and financial risks when considering the credit rating on Queensland.

QTC is the central agency for the borrowing and liability management of government departments, statutory bodies, local governments, and government-owned corporations in Queensland. QTC also provides services and advice on corporate finance and financial risk management.

We consider QTC's financial management as a strong ratings factor and consistent with the 'AA+' rating on the State of Queensland. The rating on the state is inclusive of the debt of state entities and considers QTC's financial management policies and practices. QTC's operations are an important component of the credit ratings on the state because they have a significant role in carrying out the debt and liquidity management for the Queensland government.

Queensland guarantees all QTC's debt securities and derivatives pursuant with Section 32 and 33 of the QTC Act 1988. The guarantee is inclusive of all local and foreign currency public bond issues, commercial paper programs, medium-term note programs, and private loan arrangements undertaken by QTC.

We do not assign a stand-alone credit profile to QTC because of the almost certain likelihood of timely extraordinary government support, and we don't think QTC would be subject to any transition risk as it is a nonseverable arm of the government.

The stable outlook reflects that on the ratings on the state, as well as our expectation that QTC's role will remain critical and its link integral to the state over the next two years. We would raise or lower the rating on QTC if a similar action occurs on the state or we could lower the rating if we consider the likelihood of state support will weaken. We see this scenario as unlikely over the next two years.


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