Ostrava defends its Aa3/stable credit rating – the highest possible in the country

31/7 2020

Moody´s, the international rating agency, confirmed Ostrava’s historically highest Aa3/stable credit rating. Ostrava has once again received the highest possible score, identical to the rating of the Czech Republic. 

Ostrava defends its Aa3/stable credit rating – the highest possible in the country

For illustrative purposes only. Source: City of Ostrava/Lukáš Kaboň

No city, region or other domestic entity can obtain a higher rating than the rating of its country. Moody´s awarded this score to Ostrava based on a detailed examination of the city’s finances for the past year, its current financial situation and the financial outlook, taking into account the environmental, societal (especially in connection with the coronavirus pandemic) and government-related risks. In the years 2015 to 2019, the agency has been basically steadily increasing the city’s rating level each year, reflecting its emphasis on responsible financial management.

“Even in these difficult times, Moody’s praised the city’s conservative financial management, including the annual review of current expenditures, significant decline in indebtedness and the ongoing creation of financial reserves. All of this has proved to be very far-sighted, especially in the context of overcoming the economic consequences of the coronavirus on the city’s revenues and the impact on the wider ecosystem. It is crucial to keep in mind that the updated rating already takes into account the city’s intention to take out a new long-term investment loan of CZK 1.8 billion to accelerate its strategic investments; this puts us in a great position to obtain very competitive offers from financial institutions,“ said the Mayor of Ostrava, Tomáš Macura.

By confirming its Aa3/stable rating, the Moody´s appreciated Ostrava’s strong operating results supported by strict control of expenditures, which will remain solid in 2020 and 2021. The city’s low level of indebtedness was a positive indicator as well, and it allow Ostrava to possibly finance its key projects using credit resources while still maintaining indebtedness at a sustainable level. Moody’s also praised the high liquidity that will help absorb the negative effects of the coronavirus pandemic. Even though the pandemic will negatively affect the city’s economy, the city will still generate operating surpluses, which will be used as the main source for financing capital expenditures.

The rating outlook is stable, and Moody’s assumes that the city’s sound operations, sufficient liquidity levels and debt ratios will remain stable over the next twelve to eighteen months, all in the context of institutional, macroeconomic and financial ties with the central government and in view of the state’s stable outlook.

The City of Ostrava has been rated by the rating agency Moody’s since 1998 and its rating has gradually improved from the original Baa1 to the current Aa3/stable.

1998 – 2002 credit rating of Baa1;

2003 – 2005 credit rating of A3;

2006 – 2015 credit rating of A2 stable;

2016 – credit rating of A2 positive;

2017 – credit rating of A1 stable;

2018 – credit rating of A1 positive;

2019 – credit rating of Aa3/stable.

The only Czech cities that currently boast the same rating as Ostrava are Prague, Brno, and Česká Lípa; none of the regions have this rating.