Bay Of Plenty Regional Council Assigned #AA/A-1+# Outlook Stable

Stocks and Financial Services Press Releases Friday June 29, 2018 10:52
S&P Global Ratings--29 Jun--S&P Global Ratings
RATING ACTION

On June 29, 2018, S&P Global Ratings assigned its 'AA' long-term foreign-currency and local-currency issuer credit ratings and 'A-1+' short-term ratings to Bay of Plenty Regional Council, a New Zealand local government. The outlook on the long-term ratings is stable.

OUTLOOK

The stable outlook reflects our view of Bay of Plenty Regional Council (Bay of Plenty)'s financial management and our expectation that large after-capital account deficits will be temporary. This reflects the large capital program between 2018 and 2020 to repair Bay of Plenty's infrastructure after floods in 2017 and to future proof the region against potential subsequent floods. The temporary nature of these deficits means its debt burden should remain reasonably flat.

Downside scenario

We could lower our ratings on the Bay of Plenty if its budgetary performance weakens beyond our forecasts and its large deficits continue during a sustained period, driving its debt levels substantially higher than we expect. This could occur if expected revenue growth does not materialize or capital expenditure continues at current levels and does not return to previous amounts. Alternatively, we could lower our ratings if liquidity coverage were to weaken substantially and was not enough to cover future maturities or its perpetual preference shares if they were called, or if we were to lower our ratings on the New Zealand sovereign.

Upside scenario

We could raise our ratings on Bay of Plenty if we raised our ratings on the New Zealand sovereign, and if Bay of Plenty's budgetary performance were to strengthen, thereby reducing the deficit and its debt levels.


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