Media Release

1 April 2016

Rotorua gains AA- international credit rating

Rotorua Lakes Council has been given an internationally recognised credit rating of AA- by Fitch Ratings, one of the top three credit rating agencies in the world.

https://www.fitchratings.com/site/fitch-home/pressrelease?id=1001855

AA- is a very high credit rating that denotes expectations of very low default risk. It indicates very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

The council sought the credit rating to ensure even greater discipline of its financial management and decision-making.

Chief executive Geoff Williams said achieving such a good rating was a significant milestone.

“It will provide council with greater access to more competitive borrowing rates and provide more flexibility when raising loans, including potentially cheaper loan funding. We’re not looking to increase borrowing but it will help reduce the cost of borrowing in future.”

It is estimated Rotorua Lakes Council will save up to $300,000 a year in the long term as debt matures and the rating allows access to better interest rates.

Fitch Ratings is one of three internationally recognised credit rating agencies used in New Zealand along with Standard & Poors and Moody's. Fitch has in the past provided ratings in New Zealand for two councils – Hamilton and Invercargill - and several companies.

Rotorua mayor Steve Chadwick said the credit rating was a major step forward for the council and would bring even greater discipline to council’s financial management and decision-making.

“Every financial decision we now consider we must factor in what affect it might have on our AA- rating.

“Following on from the Price Waterhouse Cooper review of council in 2013, which was somewhat scathing of our financial situation, Fitch Ratings has provided us with an independent lens that says we are doing well and, most importantly, they have confidence in our financial position.

"Having an external agency like Fitch Ratings assessing us on an ongoing basis should bring increased comfort to Rotorua ratepayers that the district’s financial affairs are being well monitored," said Mayor Chadwick.

The process to have a credit rating completed took several months of investigating and analysis by Fitch Ratings which included looking at:

• The Long-term Plan and comparing the council’s progress against it

• The organisation's governance and management structure

• The socio-economic drivers of the district

• Current and forecast debt levels

• The certainty of council income

• The organisation's investment and liability management policies.

An increasing number of councils are now receiving credit ratings from global rating agencies.

Local Government New Zealand recently published a snapshot report on local government’s financial health.

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