Moody's downgrades George municipality to A3.za

Moody's Investors Service said it downgraded by one notch the national scale issuer rating of the South African municipality of George to A3.za, with a stable outlook, from A2.za.

Moody's said the downgrade of George municipality's rating reflects the marked deterioration in financial and debt metrics observed over the past few years.

Moody's noted that the city's focus on capital expenditure has led to a material deterioration in its financial profile, as reflected by consistently large cash financing deficits.

The city managed to cover financing requirements by making extensive use of financial leverage, thus pushing debt levels to ZAR 550 million or a high 72% of operating revenues in 2011 and by tapping large cash reserves accumulated over time.

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