Fitch affirms BBB- rating for Bucharest and three other Romanian municipalities

Fitch Ratings confirmed the ratings for the long-term debt in local and foreign currency of Bucharest, Brasov, Oradea, and Buzau at BBB-, with a negative outlook.

The confirmation comes after the rating agency maintained Romania's sovereign rating at BBB-/negative.

The negative outlook of the municipalities reflects that of Romania, the rating agency explains.

Fitch assesses Bucharest's Standalone Credit Profile (SCP) at BBB+. The assessment reflects Fitch's view of moderately high risk relative to international peers that Bucharest's ability to cover debt service by the operating balance may weaken unexpectedly over the forecast horizon, either because of lower-than-expected revenue or expenditure above expectations or because of an unanticipated rise in liabilities or debt-service requirements.

Fitch assesses Bucharest's ability to generate additional revenue in response to a possible economic downturn as "weaker," in line with other Fitch-rated Romanian cities. Positively, the city has a proven record of revenue growth, even in times of lower GDP growth.

Bucharest is exposed to refinancing risk as there are three bonds (RON 555 mln, over EUR 110 mln each), which will mature in 2022, 2025, 2028, and one RON 555 mln loan maturing 2023. The loan was contracted in April 2020 with the European Bank for Reconstruction and Development (EBRD) to refinance maturing debt.

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