Fitch Affirms Bogota, Capital District of Colombia's Ratings; Outlook Stable

MONTERREY, Mexico--()--Fitch Ratings has affirmed Bogota, Capital District of Colombia's (the district) ratings as follows:

--Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BBB';

--Long-Term Local Currency IDR at 'BBB+';

--Long-Term National Rating at 'AAA (col)';

--Short-Term National Rating at 'F1+ (col)'.

The Rating Outlook is Stable.

In addition, Fitch affirms the following ratings:

--USD300 million equivalent, 9.75% Colombian Peso-denominated notes due 2028 at 'BBB';

--COP2,000,000 million notes at 'AAA (col)'.

The affirmations reflect Bogota's financial strength as well as its manageable debt metrics, including debt projections.

KEY RATING DRIVERS

Bogota's ratings reflect its solid operating performance and its manageable debt levels, including a significant increase in debt to cover its Development Plan. The district's strong socio-economic profile and weight in the national economy in terms of GDP contribution are also considered in the affirmation. Political risk associated with the public sector and quality of the administration have been incorporated as well.

In Fitch's view, the main risk or limitation for Bogota is the increasing social and infrastructure needs, particularly those related to transportation.

Bogota is the headquarters of the nation's most important corporates, also of legislative and judicial institutions. Bogota is the most populated city in the country, with 7.9 million inhabitants. The district contributes 25% to the national GDP, establishing itself as the largest economy in Colombia. The current administration took office in January 2016 and its term will end in 2020. Fitch will monitor the plans of the new administration; we do not expect it will make significant changes in financial and debt policies.

In 2015, tax revenues represented approximately 65% of its total revenues, climbing to COP7 trillion (USD2.355 billion), keeping annual growth rates supported by the district's tax management model, good track record of tax collection and the sound economy of the district. The positive revenue trend of the last five years is reflected by annual growth rates above 8% on average during the period.

Bogota's operating margin increased in 2015; this increase was attributable to a growth of operating revenue and control in the operating expenditure. Overall, the district recorded a good fiscal and financial performance with an operating balance of 29.7% of its operating revenue. As of March 2016, operating expenses pressure the operating margins. Nevertheless, Fitch estimates that the operating margin will remain for FY16 at approximate 25% of operating revenues. Such operating margin compares favorably with international standards and is in accordance with the risk level assigned.

The district maintains a conservative debt policy, focused on long-term external debt. By May 2016, the debt level was COP1.33 trillion (USD448 million), representing 97% of its external debt and 54% of the total debt is denominated in local currency. The leading risks linked to its debt portfolio such as exchange rate risk and interest rate fluctuations, as well as liquidity levels, are factors watched closely by the district.

In 2015 and according to Bogota's estimations, the interest-to-operational savings ratio diminished to 1.7%, significantly low relative to the maximum 40% established by the Ley 358 (Law 358). On the other hand, debt represented 14.7% of current revenues at the end of the year, below the 80% maximum established as a limit in Law 358.

The district administration, through its 'Plan de Desarrollo Bogota Mejor para Todos', plans the realization of important infrastructure and mobility projects based on their financing strategy of greater tax revenues, current transfers, capital revenues and debt. Among their major projects are the Metro of Bogota, 30 schools, six hospitals, new investment for Transmilenio, and security infrastructure.

Bogota expects to use additional resources through debt of COP5.1 trillion, including the debt for COP2.5 trillion approved by the Concejo Distrital of the last administration. Fitch will consider the debt incurred, forecasting an increase in its debt indicators over the next years that is still compatible with the current rating of the district given its sound operating performance as strong liquidity.

According to Bogota, the pension liabilities amounted to COP7.8 trillion at year-end 2015 and the coverage was 70.2%, which has been financed according to Law 549 from 1999.

RATING SENSITIVITIES

The Stable Outlook reflects that Fitch's sensitivity analysis does not foresee any developments that would lead to a rating action.

An upgrade of the sovereign rating, provided that Bogota's operating performance remain solid, could trigger a positive rating action over its international rating. The main factors that individually or collectively could lead to a negative rating action include: an increase of debt additional than expected, a substantial deterioration in operating margins and cash levels, and persistent budget deficits.

Additional information is available on www.fitchratings.com.

Applicable Criteria

International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878660

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008270

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008270

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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:
Ileana Guajardo, +52 81 8399 9100
Director
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L. Mexico
or
Secondary Analyst:
Carlos Vicente Ramirez, +57 1 326-9999
Senior Director
or
Committee Chairperson:
Christophe Parisot, +33 1 44 29 91 34
Managing Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Ileana Guajardo, +52 81 8399 9100
Director
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L. Mexico
or
Secondary Analyst:
Carlos Vicente Ramirez, +57 1 326-9999
Senior Director
or
Committee Chairperson:
Christophe Parisot, +33 1 44 29 91 34
Managing Director
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com