MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has assigned Metropolitan Municipality of Lima's (MML) proposed up to PEN 593 million bond a 'BBB-(EXP)' long-term local currency rating.
The bond will have a bullet maturity and be issued in PEN with a maximum maturity of 10 years. The bond will be subject to the laws of the state of New York and will be a senior unsecured obligation of MML. The bond will rank pari passu with all previous and future obligations of MML. However, MML can create liens securing indebtedness as long as the debt service costs of such secured indebtedness do not exceed 25% of MML's revenues for any fiscal year.
The bond proceeds will be used for financing capital expenditure for the period 2013 and 2014 and for repaying domestic borrowing.
KEY RATING DRIVERS
Fitch has assigned a long-term local currency rating of 'BBB-(EXP)' in line with the issuer's long-term local currency rating ('BBB-'/Positive Outlook). The ratings reflect the importance of MML in the national context as it is the economic and political capital of the country, and the high and dynamic collection of municipal taxes which supports high-margin operations. The ratings also factor in the significant investment plans of MML, and which will add pressure to current expenditure. To partially fund capital expenditure, debt will rise. Debt as a proportion of current revenue is estimated to increase from the present 22% to about 50% by end-2015, taking into account the bond proceeds. This level of debt is manageable particularly with the expected growth in the tax base of Lima.
The final rating is contingent upon the receipt of final documents conforming to information already received.
A rating action would be triggered in the event of a rating action on the issuer.
The presale report is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: PEN Bond Issue -- Metropolitan Municipality of Lima