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CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY - Moody's rating recent developments - BIJHB
Moody's rating recent developments - BIJHB CITY OF JOHANNESBURG METROPOLITAN MUNICIPALITY (a municipality as described in section 2 of the Local Government Municipal Systems Act, 2000, duly established in terms of Notice No. 6766, promulgated in the Provincial Gazette Extraordinary of 1 October 2000 in terms of section 12(1) read with section 14(2) of the Local Government : Municipal Structures Act, 1998, as amended) Issuer Bond Code: BIJHB ("City of Johannesburg" or the "Issuer") Bond Code: COJ05 ISIN No: ZAG000054339 Bond Code: COJ07 ISIN No: ZAG000085044 Bond Code: COJ08 ISIN No: ZAG000137571 Bond Code: COJG01 ISIN No: ZAG000116708 MOODY'S RATING RECENT DEVELOPMENTS Moody's has on 01 April 2020 downgraded the Baseline Credit Assessment (BCA) of the City of Johannesburg to ba1 from baa3, and long term Global Scale Ratings (GSR) to Ba1 from Baa3 issuer and debt ratings, and maintained the negative outlook following the Moody's downgrade of the Government of South Africa rating to Ba1 from Baa3 with a negative outlook on 27 March 2020. Moody's has also downgraded the City's short-term GSR ratings to NP from P-3. Moody's has however affirmed the long-term and short-term national scale issuer and debt ratings of Aa1.za/P-1.za of the City, citing the individual strength displayed by the issuer. Moody's cited that the one notch downgrade on City of Johannesburg reflects the close economic, operational, financial and institutional linkages between the municipality and its support provider, the Government of South Africa, illustrating the centralised nature of the local public sector. The negative outlook on City of Johannesburg mirrors the weakening of the credit profile of the sovereign. Any further weakening of the South African sovereign credit profile could lead to downward adjustments in the ratings of City of Johannesburg. Additionally, any individual financial difficulties resulting in cash- flow pressures and consistently high or growing debt levels could lead to downward rating actions independent of sovereign rating movements. Upward rating pressure is highly unlikely considering the negative outlook, however if the sovereign rating is stabilized, Moody's would also consider stabilizing the outlook for City of Johannesburg. Moody's has also stated that where there is any evidence of the City of Johannesburg's ability to display comparatively stronger credit fundamentals and an ability to withstand the deterioration of the operating environment, it could also exert upward rating pressure. • The City of Johannesburg has achieved the following in the year 2018/2019 • A very strong financial position with a surplus of R6.9 billion from R2.9 billion in 2017/18 • A very healthy cash balance of R5.3 billion from R2.2 billion in 2017/18 • Spent 91% of the capital budget which increased to R8.1 billion from R7 billion in 2017/18. • An unqualified audit opinion for 7 years running City of Johannesburg is still able to maintain stable debt ratios and still generate surpluses, all of which serve to lower risk to investors. The City of Johannesburg Annual Report was recently released and made available to the public on the 31st of January 2020. See updated links to the Annual Report and Annual Financial Statements: Annual Report: https://www.joburg.org.za/documents_/Documents/Annual%20Reports/20182019%20Annual%20Report/2018-19%20City%20of%20Johannesburg%20Annual%20Report%20.pdf Financial Statements: https://joburg.org.za/documents_/Documents/Annual%20Reports/20182019%20Annual%20Report/Audited%20City%20of%20Johannesburg%20Group%20AFS%2030%20June%202019.pdf 02 April 2020 Debt Sponsor Absa Bank Limited (acting through its Corporate and Investment Bank division) Date: 02-04-2020 01:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.