News Column

Fitch Upgrades Municipality of Medellin's International Ratings; Outlook Revised to Stable

January 21, 2014

MONTERREY, Mexico --(BUSINESS WIRE)-- Fitch Ratings has upgraded Municipality of Medellin's ratings as follows: --Long-term Issuer Default Rating (IDR) to 'BBB' from 'BBB-'; --Long-term local currency IDR to 'BBB+' from 'BBB'. Fitch has revised the Rating Outlook to Stable from Positive. KEY RATING DRIVERS According to Fitch, the ratings of the municipality are capped by Colombia's sovereign risk [Long-term IDR 'BBB', long-term local currency IDR 'BBB+']. The upgrade of Medellin's ratings is the result of the same action taken by Fitch on the Sovereign on Dec. 10, 2013 . Medellin's credit strengths remain: the city's relevant role in the Colombian economy, the municipality's sound fiscal and financial policies which had allowed maintaining high operating margins and significant cash flow; in addition, to the important financial support of common dividends transferred from Empresas Publicas de Medellin (EPM), which helps financing major investments. Nonetheless, the ratings incorporate the political risk associated with the public sector, a prospective debt-burden much higher than historical, although manageable, and low coverage of pension liabilities, which has been financed according to Colombian Law. Regarding debt, Medellin registered COP626,723 million (approximately USD324.3 million ) as of Sept. 30, 2013 , concentrating 62% of it in foreign debt. The administration plans new debt for an amount up to COP224,390 million , for modernization and projects about development plan. Moreover, considering the composition of debt and the payment of ordinary bonds in 2016, the administration is currently considering measures to reduce the risks (exposure to the exchange rate). Fitch will monitor the actions defined. Since the commitment through future budget allocations that the administration has adopted as a mechanism to execution of the development plan, the sustainability indicator will rise in 2013-2014. Nevertheless, Fitch believes that credit metrics are appropriate for the risk level assigned, and the indicators will fall in the next years. RATING SENSITIVITIES The Stable Outlook reflects that Fitch's sensitivity analysis does not foresee any developments that would lead to a rating action. An upgrade of the Sovereign rating, accompanied by Medellin's solid operating performance, could trigger a positive rating action. Future developments that may, individually or collectively, lead to a negative rating action include a significant debt increase (short-term and/or long-term), an important deterioration in its operating margins and deterioration of cash levels. Additional information is available at ' www.fitchratings.com '. Applicable Criteria and Related Research : --'Tax-Supported Rating Criteria' dated Aug. 14, 2012 ; --'International Local and Regional Governments Rating Criteria, Outside the United States' , dated April 9, 2013 . Applicable Criteria and Related Research : Tax-Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015 International Local and Regional Governments Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704438 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=815900 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE ' WWW.FITCHRATINGS.COM '. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Ratings Primary Analyst Ileana Guajardo Director +52 81 8399 9100 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes 2612 Monterrey, N.L. or Secondary Analyst Carlos Vicente Ramirez Senior Director +57 1 3269999 or Committee Chairperson Fernando Mayorga Managing Director +34 93 328 8407 or Media Relations: Elizabeth Fogerty , New York , +1 212-908-0526 Email: elizabeth.fogerty@fitchratings.com Source: Fitch Ratings


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