S&P lowers Budapest view to negative

Standard & Poor's said it revised its outlook on the City of Budapest to negative from stable and affirmed the city's BBB+ long-term and A-2 short-term foreign- and local-currency issuer credit ratings.

The change follows a revision of the outlook on the Republic of Hungary (BBB+/A-2) to negative from stable. About 50% of the city's debt is guaranteed by the state and all contract loans are linked by cross-default clauses; the ratings on the city are therefore closely linked to that on Hungary.

The agency said the ratings on Budapest reflect its solid economic profile, good financial performances, prudent debt management and comfortable liquidity as well as the executive's strong commitment to keeping debt moderate in the coming years while implementing a sizable capital expenditure program.

Nevertheless, the ratings continue to be constrained by Budapest's lack of financial flexibility, which results from the Hungarian institutional framework for local and regional governments, and pressures associated with the local transport company, BKV Zrt, S&P said.

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