S&P affirms Zagreb

Standard & Poor's said it affirmed its BBB long-term issuer credit rating on the Croatian City of Zagreb.

The outlook is stable.

The ratings on Zagreb are based on its consistently strong budgetary performance, its low and decreasing debt level and its status as the economic, financial, and administrative center of the Republic of Croatia (foreign currency BBB/stable/A-3; local currency BBB+/stable/A-2).

Constraining factors include limited financial flexibility and an expected increase in the liabilities of municipal companies from currently moderate levels, the agency said.

Debt levels are low. In 2004, direct debt and total tax-supported debt represented 15% of operating revenues and 28% of total revenues, respectively. Following recent changes in state legislation, the city will decrease its direct debt, but tax-supported debt is expected to grow to a still modest 40% over the next two to three years, the agency said.

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