Moody's rating recent developments - BIJHB

    (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 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 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:

    Financial Statements:

    02 April 2020

    Debt Sponsor
    Absa Bank Limited (acting through its Corporate and Investment Bank division)

Date: 02-04-2020 01:30:00
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