Moody’s reviews bond-issuing Aberdeen Council

Moody’s Investors Service said it has completed a periodic review of the ratings of Aberdeen City Council, which completed a successful £370 million bond sale via the London Stock Exchange in 2017 in a first for a Scottish council.

Moody’s said the council has a “relatively high level of debt” but it has a “strong track record of budgetary performance.”

The credit rating agency said the council has “a more favourable funding environment when compared to English local authorities” and Moody’s assessment is that the local authority has “a high likelihood of extraordinary support from the UK government (Aa3) in the event that the issuer faced acute liquidity stress.”

Moody’s said: “The credit profile of Aberdeen City Council (A1) is supported by its strong track record of budgetary performance including achievement of savings targets and a more favourable funding environment when compared to English local authorities.

“Its primary credit challenges are its relatively high level of debt which has been used to fund its large capital programme, including The Event Complex Aberdeen and a new town centre development and operational risks related to these two projects.

“These challenges will be exacerbated by the impact of the coronavirus pandemic.

“Aberdeen’s credit profile is also supported by the strong institutional framework for UK local authorities which includes the requirement to pass balanced budgets and tight fiscal and regulatory oversight by central government.

“UK local authorities also have very strong market access through the UK Public Works Loan Board, a department of the UK Debt Management Office.

“Aberdeen’s rating of A1 incorporates its baseline credit assessment (BCA) of a3 as well as Moody’s assessment of a high likelihood of extraordinary support from the UK government (Aa3) in the event that the issuer faced acute liquidity stress.”

The process was conducted through a portfolio review discussion held on October 25 in which Moody’s “reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.”

The review did not involve a rating committee.

“This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future,” said Moody’s.

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