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Fitch Affirms Canton of Zurich at 'AAA'; Outlook Stable
2014年2月21日 / 下午4点43分 / 4 年前

Fitch Affirms Canton of Zurich at 'AAA'; Outlook Stable

(The following statement was released by the rating agency) FRANKFURT/LONDON, February 21 (Fitch) Fitch Ratings has affirmed the Canton of Zurich's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'AAA and Short-term IDR at 'F1+'. The Outlooks on the Long-term IDRs are Stable. KEY RATING DRIVERS The affirmation reflects Zurich's high degree of autonomy, its wealthy and dynamic economy, which translates into a strong tax base and sound debt coverage ratios, and its prudent budgetary management and financial flexibility. It also reflects its relative tight operating margin and increasing debt burden. The Stable Outlook reflects Fitch's expectations that Zurich will maintain a strong financial profile, even considering a subdued budgetary performance. It also reflects improvement in debt coverage ratios. Zurich has a strong and dynamic economy with above average wealth levels even in a Switzerland context. However, there are signs of overheating in the local real estate market especially in the city of Zurich, the canton's capital, where about 30% of the canton's 1.4 million inhabitants live. A slowdown of Zurich's economy would negatively impact the real estate and banking sector, two large contributors to the canton's GDP and revenue. At end-2012, Zurich had cash and cash equivalents of CHF2.6bn outstanding. Part of this stemmed from debt contracted in 2012 for the recapitalisation of the canton's pension fund, which was paid out during 2013. However, Zurich always has cash of approximately CHF1bn usually covering debt repayments in a budgetary year. Furthermore, Zurich is active in the capital markets and we assume it will retain access to short-term liquidity in case of need, largely mitigating the canton's refinancing risk. According to preliminary results 2013, Zurich's budgetary performance was slightly below that of 2012 and the canton expects an overall deficit of CHF237m, while the budget envisaged a surplus of CHF104m. Although this translated to weaker debt coverage, the canton's interest burden is still low and close to 1% of operating revenues. Driven by lower than expected tax revenues of about CHF86m and not achieving cost rationalisation measures amounting to about CHF250m, Zurich will likely remain below budget. Self-financing of its relatively low capital expenditure requirements has declined. For 2014, the canton expects a minor improvement and an operating margin close to zero. Since Zurich has a healthy track record of financial revenue stemming from dividends of its 100% owned Zuercher Kantonalbank (ZKB; AAA/Stable/F1+), the current margin is likely to remain positive until 2017 and capital expenditure could be covered by 60% in 2015. Fitch considers these assumptions are realistic and the canton is likely to improve above expectations. Switzerland's real GDP is estimated to grow by 2.1% in 2014 and 2.2% in 2015, slightly above the 1.8% achieved in 2013, contributing to the canton's dynamic tax base. Zurich's direct risk was CHF5.064bn at end-2013 (2012: CHF4.3bn), slightly below its debt schedule. However, the debt burden and debt coverage remains sound and debt servicing may have accounted for a low 5.9% of current revenue in 2013. The canton plans to increase debt until 2017 when it will likely amount to CHF5.539bn, still below the past ten years' peak of CHF7.4bn and not a meaningful risk. Zurich has material contingent liabilities and net overall risk amounted to CHF21.6bn at end-2012. Most relate to guaranteed obligations of its 100% owned Zuercher Kantonalbank (AAA/Stable/F1+) and the unfunded portion of the pension fund. The recapitalisation measures should protect the canton from a future higher burden and Fitch considers their management by the canton as prudent. RATING SENSITIVITIES Given the canton's large tax potential, a downgrade is unlikely under current conditions. An increase in debt beyond Fitch expectations with debt to current revenue and debt payback structurally above 100% and 15 years, respectively, largely limiting the canton's financial flexibility, or materialisation of contingent risk would require a review of the rating. Significant changes in the canton's financial leeway or additional financial obligations, either in the inner- or intra-cantonal context could also be rating negative. KEY ASSUMPTIONS Our base case scenario relies on the following assumptions: - High degree of the cantonal financial autonomy will remain in place. - Zurich's economic progress will be in line with or exceed the expected growth rates for Switzerland supporting the envisaged development of tax revenues. - Expected growth of Zurich's direct risk will not be accompanied by a decline of the budgetary performance and weakening of the debt coverage above Fitch's expectations. Contact: Primary Analyst Guido Bach Senior Director +49 69 76 80 76 111 Fitch Deutschland GmbH Taunusanlage 17 D-60321 Frankfurt am Main Secondary Analyst Christophe Parisot Managing Director +33 1 44 29 91 34 Committee Chairperson Guilhem Costes Senior Director +34 93 323 8410 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable criteria, "Tax-Supported Rating Criteria", dated 14 August 2012, "International Local and Regional Governments Rating Criteria outside United States", dated 9 April 2013 on Applicable Criteria and Related Research: Tax-Supported Rating Criteria here International Local and Regional Governments Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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.

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