The City of Gothenburg chooses one credit rating agency instead of two
The City of Gothenburg allows external credit rating agencies to perform credit ratings of the municipality’s overall economy. The credit rating is made in order to gain full access to the capital market, where a significant portion of the municipality’s borrowing takes place. A high credit rating gives better access to financing and a better price for loan financing, than having a low credit rating or no credit rating at all.
The transition from two to one credit ratings is made for cost reasons. The City of Gothenburg is the only municipality in Sweden with double credit ratings and finds no reason to maintain both in the future. The City of Gothenburg has a good credit rating with a stable outlook, and we choose to retain the credit rating from the credit rating agency used by other Swedish municipalities, namely Standard & Poor’s. The agreement with Moody´s has been terminated. The decision assessment is that access to the capital market will not be impaired by the decision.
The credit rating agencies, Moody’s and Standard & Poor’s, have this year confirmed the City of Gothenburg’s strong credit rating. Since 2006, the municipality’s credit rating from Moody’s has been the highest possible, Aaa, and since 2007 Standard & Poor’s has given the municipality its second highest rating, AA +. Both ratings have a stable outlook.
Contact City of Gothenburg:
Portfolio Manager Fredrik Block, email@example.com, Telephone: +46(0)31 368 02 91
Questions and answers
Why does the municipality have external credit ratings?
The municipality has credit ratings primarily for full access to the capital market. A large part of the municipality’s borrowing is made on the capital market by issuing municipal certificates and municipal bonds. The City of Gothenburg’s strong credit rating gives us access to loan financing, and at a low price compared to an actor with a poor rating or no credit rating at all.
Why is the City of Gothenburg terminating its agreement with one of the credit rating agencies?
The City of Gothenburg is the only municipality in Sweden with double credit ratings and we find no reason to maintain both in the future. The decision assessment is that access to the capital market will not be impaired by the decision. By continuing with the institute used by other municipalities in Sweden, it will also continue to be easy and clear for market players participants to be able to understand and assess the City of Gothenburg’s credit rating.
How much are we saving?
The annual savings of choosing just one external credit rating agency is just over 3 million SEK. In addition, we’ll save on the internal resources required to conduct the two audits annually with each institute.
Why is the change being made right now?
The aim of the measure decision is to make cost savings, as part of our continuous work on general and efficiency improvements. We are choosing to enact the change at a time when we’ve just confirmed both credit ratings with high grades and stable outlook. This is to clarify that the decision does not have to do with changed financial conditions.
_ _ _ _ _
The credit rating institutes Moody´s and Standard & Poor´s have during the year confirmed the municipal City’s strong credit rating. The City’s credit rating from Moody´s has since 2006 been the highest possible, Aaa, and from Standard & Poor´s since 2007 the next highest, AA+. Both ratings have stable outlook.
The ratings facilitate the City’s access to the Swedish and international capital markets. Factors emphasised as positive in the analyses are predictability in economic development, a dynamic local economy with stable outlook, strong financial control with flexibility in the budget in relation to the outside world and good liquidity preparedness. Among the risks mentioned are investments in both the company and committee sectors that affect the degree of indebtedness.
Released calendar for rating reports:
Standard & Poor’s:
September 2019 Standard & Poor´s affirmed the city’s rating, AA+ with stable outlook. The rating has been unchanged since 2007. Please see the report below:
June-19-2017 – Standard & Poor’s first Green Evaluation report on the City of Gothenburg green bonds issued in June 2016 published. City Of Gothenburg Receives First Green Evaluation For Municipal Green Bond, With A Score Of E2/67.
August-30-2019: Credit rating agency Moody´s once again affirmed the city’s rating, Aaa with a stable outlook. The rating has been unchanged since 2006:
May 31, 2016 Moody’s Highest GB1 Grade Assigned to City of Gothenburg Green Notes Offering Pressrelease https://www.moodys.com/research/Moodys-assigns-Green-Bond-Assessment-GBA-of-GB1-to-the–PR_349755
Last updated: December 5, 2019