Moody's upgrades Daejeon

Moody's Investors Service said it upgraded Daejeon metropolitan city's issuer rating to Aa3 with a stable outlook from A1 with a positive outlook and has similarly upgraded the rating assigned to Daejeon Riverside Expressway Funding, plc •6.6 billion bonds to Aa3 with stable outlook.

The upgrade of Daejeon's rating reflects the upgrade in Korea's rating to Aa3, the agency noted.

The rating reflects the supportive institutional framework for Korean local governments, including strong central government controls and substantial transfers, the agency said.

The national government largely determines budgetary operations of local governments through its mandating of expenditures, setting of tax rates, determination of salaries, setting of specific borrowing limits for each entity, and lending to local governments, which reduces the likelihood that they will experience fiscal dislocation, Moody's said.

Daejeon's favorable financial and debt metrics, including its annual surplus operations and moderate debt burden, both of which are underpinned by government transfers, and the city's diversified economic base also support the rating, the agency noted.

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