Moody's cuts Kosice

Moody's Investors Service said it downgraded the City of Kosice's national scale rating to Aa3.sk from Aa2.sk.

The outlook is negative.

The downgrade reflects the deterioration in the city's financial profile over the last two years, which is now more in line with the Aa3.sk rating.

The city's operating performance has come under significant pressure in 2010 as the unprecedented sector-wide shortfall in the city's personal income tax revenue has been fully realized on its budget, Moody's said.

Given the size of the shortfall and the city's already squeezed expenditure, it is expected to record a gross operating deficit of 7.5% of operating revenue in 2010, the agency said.

The agency said it believes the city may have difficulty in rebalancing its operating budget in the coming years given that funding from the central government fails to fully capture the city's sizeable infrastructure requirements.

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