Moody's cuts Budapest

Moody's Investors Service said it downgraded the issuer rating of the City of Budapest to Baa3 from Baa1.

The downgrade follows the decision to downgrade the sovereign bond rating of Hungary from Baa1 to Baa3.

The outlook is negative.

The downgrade on Budapest reflects the close links between the city and the sovereign given that 60% of municipal direct debt benefits from a state guarantee and the presence of cross-default provisions that creates a link with the rest of the city's debt, Moody's said.

The negative outlook reflects the uncertainty of Hungary's fiscal consolidation strategy and concerns about the central government's high refinancing requirements, the agency said.

The rating of Budapest continues to be underpinned by the city's good operating performances, even during the recent economic crisis, Moody's added.

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