Fitch Assigns 'CCC(EXP)' Expected Rating to City of Buenos Aires' Proposed Bond

MONTERREY, Mexico--()--Fitch Ratings has assigned an expected long-term rating of 'CCC(EXP)' to the City of Buenos Aires's (CBA) new bond.

The bond will be issued up to USD500 million under a USD2.3 billion EMTN Program. This note is denominated in USD, to accrue a fixed interest rate to be determined at issuance and payable on a semi-annual basis. The maturity of the bond will be six years, having annual payments in the last three years. The bond will be a senior unsecured obligation of the CBA.

The city intends to use the net proceeds of the issue under the Series 11 Notes to make the bullet payment of the Series 8 issue for an amount of USD475 million, due in April 6, 2015.

KEY RATING DRIVERS

Fitch has assigned a long-term rating of 'CCC(exp)', which is in line with the city's 'CCC' Issuer Default Rating. The rating of the CBA considers its adequate fiscal and budgetary performance, generating sound operating margins over the last years despite the pressures on operating expenditures; it maintains high financial flexibility, adequate leverage and sustainability ratios; and it is Argentina's primary economic and financial center. The CBA's ratings are constrained by the sovereign's country ceiling.

Regarding debt, at year-end 2014, CBA's outstanding direct debt amounted to ARS 18,302 million, 53.4% higher than 2013. The CBA's unfavourable debt structure, having 96.9% in foreign currency, is a limitation since debt growth is mostly explained by ARS depreciation over 30% against the USD in 2014, but at the same time this has been somewhat mitigated by a high inflationary environment that has fuelled tax growth. Debt represented 33.9% of the current revenues and 2.8 times the operating balance budgeted for 2014, which still compares favourably with the provincial average of 38.8% and 4.5x (2013), respectively.

The city's direct debt has been increasing since 2009, largely associated with the execution of investment projects; however, its debt profile is still adequate and in line with the current rating level.

Currently, the largest debt service payments are scheduled for 2015 and 2017 due to the maturity of notes paying face value on those years (Series 8 and 10). This new bond will liberate financial pressures to the City and will improve its debt maturity profile.

RATING SENSITIVITIES

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:

--'Tax Supported Rating Criteria', Aug. 14, 2012;

--'International Local and Regional Governments Rating Criteria - Outside the United States', April 13, 2014.

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

International Local and Regional Governments Rating Criteria - Outside the United States

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=719656

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=979535

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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.

Contacts

Fitch Ratings
Primary Analyst
Humberto Panti
+52 81 8399 9100
Senior Director
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L. Mexico
or
Martha Gonzalez
Associate Director
+52 81 8399 9100
or
Committee Chairperson
Fernando Mayorga
Managing Director
+34 93 323 8407
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Humberto Panti
+52 81 8399 9100
Senior Director
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L. Mexico
or
Martha Gonzalez
Associate Director
+52 81 8399 9100
or
Committee Chairperson
Fernando Mayorga
Managing Director
+34 93 323 8407
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com