| Wed 9 Nov 2011, 11:37 | | BIJHB - City of Johannesburg Metropolitan Municipality - Media Release |
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JSE
BIJHB
BIJHB - City of Johannesburg Metropolitan Municipality - Media Release
DATE: 9 November 2011
CITY`S FINANCES ARE STABLE AND IMPROVING
The last few weeks has seen the City of Johannesburg receiving a spate of
negative reporting in the media regarding its financial position.
The City of Johannesburg has recently been assessed by FicthRatings, where the
City`s credit rating was affirmed at AA-. The rating affirmation reflects the
continued improvement in CoJ`s liquidity and working capital in line with
Fitch`s expectations, as well as moderate borrowing, which has stabilised debt
at around 45% of revenues and equal to less than 10 years of the current
balance.
However, Fitch raised concerns with regards to low levels of collection rates
and operating margin requiring to be improved to 15% and a debt-to-current
balance strengthen to below five years. Fitch highlighted that CoJ`s continued
tapping into the commercial paper market, if not kept in check, may weaken
interest coverage ratio.
The City of Johannesburg has responded to all these concerns; revenues are
improving, collection rates are improving, a robust cashflow management process
has been implemented through which liquidity gaps are managed to ensure that
defaults do not occur, and significant strides have been made in addressing the
billing and the system challenges. The first quarter numbers bears testimony to
this.
The City of Johannesburg has a Redemption Sinking Fund which was set up to
redeem all bonds (long term) issued when they fall due. Contributions into this
Fund are up-to-date, and therefore, bondholders` investment in the City of
Johannesburg is not at risk. The City uses Commercial Paper(short term) to
bridge cash flow mismatches arising as a result of the natural timing
differences between when cash is utilized and when operating inflows are
received. Such grants come periodically whist our expenditure programmes for the
daily running of the City are continuous. The commercial paper issuance is done
at the back of the anticipated grants and therefore the risk, if any, for the
investors is minimized.
The City of Johannesburg therefore wishes to assure the investment community
that the City`s financial position is stable, contrary to media speculation.
Both short and long term debt will be repaid as and when it falls due. The City
of Johannesburg will remain and is committed to being a credible borrower while
confronting challenges of the day.
Gabu Tugwana
Communication Director
Public Liaison Department
City of Johannesburg
Office of the Executive Mayor
Tel: 011 407-7162
Fax: 011 339-1531
Cell: 082 495 5673
Date: 09/11/2011 11:37:02 Produced by the JSE SENS Department.
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