HCC receives international credit rating of AA-

Council receives international credit rating of AA-

Hamilton City Council has been given an internationally recognised credit rating of AAby Fitch Ratings, one of the top three credit rating agencies in the world.

Council has sought the credit rating to enable access to more competitive borrowing rates and to give greater flexibility when raising loans, including having potentially cheaper sources of loan funding available.

Fitch Ratings is one of three internationally recognised credit rating agencies along with Standard & Poors and Moody’s. Fitch has in the past provided ratings in New Zealand for a number of companies including; Telecom, Contact Energy and Fonterra.

Chairperson of Council’s Finance and Audit Committee, Councillor Maria Westphal says the credit rating is a major step forward for Council and will bring an even greater discipline to Council’s financial management and decision making.

“In the future, any financial decisions that are proposed will need to be considered against what affect they may have on our AA- rating which in turn could impact on the overall cost of Council’s borrowing and debt.

“Having an external agency like Fitch Ratings assessing us on an ongoing basis should bring increased comfort to the ratepayers of Hamilton that the financial affairs of the city are being well monitored,” says Councillor Westphal.

The rating means individual investors or organisations lending money to Council will now be able to make a more informed decision on the credit worthiness of Council as an organisation.

“This will include the possibility of smaller retail investors known as ‘Mum and Dad investors’ being able to invest in Hamilton City Council bonds or similar, if Council chooses to raise loans through this mechanism” says Councillor Westphal.

Having a credit rating means that Council can now investigate this small retail investors funding stream more thoroughly.

The process to have a credit rating completed takes several months of investigating and analysis by the credit rating agency. Among the factors considered by Fitch when assessing the Hamilton City Council rating were:

o The organisation’s governance and management structure

o Council’s approach to city development through its 2009-19 Long Term Council Community Plan

o Current and forecast debt levels

o The certainty of Council income

o And the organisation’s investment a nd liability management policies.

Because of the nature of their business, all councils in New Zealand are considered to have a credit rating of at least an A. Comparatively, AA- is better than A+, and AAA is better than AA+.

Fitch has recently announced that the New Zealand Sovereign credit rating is on negative watch. This means that they believe the country’s credit rating may need to be downgraded in the near future. Council has been advised by Fitch that this announcement has no direct bearing on the rating assessment for Council. Future impacts on the credit rating will be assessed from how Council adjusts it’s operating and capital programmes in line with the economic predictions for the New Zealand economy as well as the other factors assessed with assigning this initial credit rating.

ENDS

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